Item 1. Financial Statements
Notes to the Condensed Financial Statements
September 30, 2015
(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.
On March 11, 2013, EZ Recycling, Inc
was formed and incorporated to serve as a wholly owned subsidiary of Highlight Networks, Inc. EZ Recycling is incorporated in the
State of Nevada. EZ Recycling was spun off in conjunction with the share purchase agreement referred to in the following paragraph.
All inter-company balances and transactions entered into prior to the change in ownership described in the following paragraph
were eliminated in consolidation and the financial statements reflect the deconsolidation of the subsidiary as of the change in
control date.
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. for an aggregate purchase price of
$315,000. The purchase represented 98% of Highlight Networks, Inc., or 57,000,000 shares of restricted common stock. The Company
has 58,167,600 shares issued and outstanding as of the date of this filing.
Nature of Business
From
the date of its change of control on June 18, 2015, the Company has conducted no business operations and has been in the developmental
stage
. Upon the Change of Control on June 18, 2015, the Company’s operating asset,
EZ Recycling, Inc. was removed and the Company reverted to shell company status.
The U.S. Securities
and Exchange Commission (the “SEC”) defines those companies 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.
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, 2016. 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, 2015.
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 June 30, 2014, the
Company had a total outstanding principal and accrued interest of $323,027 and $22,176, respectively. During the year ended June
30, 2015, an additional $77,735 was borrowed and $34,742 of interest accrued bringing the total related party debt to $457,680.
In conjunction with the change of control on June 18, 2015, all principal and accrued interest were exchanged for common stock
and a new $256,132 Promissory Note. The new note to Friction & Heat, LLC 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, 2015, there was $256,132 and $8,281 of
principal and interest, respectively, due on the Note to Friction & Heat LLC.
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
the sole managing member of Remix Ventures, LLC and former officer of Highlight Networks, Inc. As of June 18, 2015 the amount due
for rent was $216,000. In conjunction with the change of control on June 18, 2015, the balance due of $216,000 was forgiven and
was part of the $261,269 credited to paid in capital.
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
June 18, 2015, the amount due in property tax reimbursement to Remix Ventures LLC was $72,282. In conjunction with the change of
control on June 18, 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 June 18, 2015, 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
on June 18, 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 $
8,865,544
, 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 change
of control, the subsidiary was spun-off and consolidation ceased. Accordingly, at September 30, 2015 the books of the Company were
only comprised of one entity, Highlights 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.