NOTE 1 ORGANIZATION AND NATURE OF BUSINESS
Huale Acoustics Corporation. (the Company, we, us, or our) was incorporated in the State of Nevada on October 17, 2014.
On February 7, 2017 (the date of the Change of Control), Jaeson Cayne (Cayne), on behalf of and as agent for PetsZX, Inc. has acquired control of Three Million (3,000,000) restricted shares of the Companys issued and outstanding common stock, representing approximately 83% of the Companys total issued and outstanding common stock, from Arusyak Sukiasyan (Sukiasyan), the former officer and director of the Company, in exchange for $315,000 per the terms of a Stock Purchase Agreement by and between Cayne and Sukiasyan.
On May 31, 2017, the Company entered into an agreement to acquire approximately 98.8% of the issued and outstanding shares of PetsZX, Inc., a company affiliated with Cayne. This agreement was cancelled on September 1, 2017, pursuant to the terms of a Cancellation of Stock Purchase Agreement.
On October 6, 2017, as a result of a private transaction, the control block of voting stock of Huale Acoustics Corporation., represented by 3,000,000 shares of common stock was transferred from Jaeson Cayne to a syndicated group of investorsXU. And Ms. XU Dantong has become our President, CEO, CFO, Treasurer, Secretary and Chairman of the Board of Directors of the Company since October 6, 2017.
On October 17, 2017, our shareholders and board of directors approved (1) change of our company name to Huale Acoustics Corporation and (2) an increase in the authorized shares of capital stock to 800,000,000, with 700,000,000 common stock and 100,000,000 preferred stock (the Amendments). The Amendments became effective with the State of Nevada on October 26, 2017. FINRA announced on November 6, 2017 that the new name of Huale Acoustics Corporation was effective on November 7, 2017, and the new ticker symbol of HYAS was effective on November 7, 2017.
NOTE 2 GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company had limited revenues and incurred losses as of September 30, 2017. The Company currently has negative working capital, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. Due to these factors, there is substantial doubt about the Companys ability to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it will be able to raise additional funds through the capital markets. In light of managements efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
NOTE 3 BASIS OF PRESENTATION
The accompanying unaudited financial statements of Huale Acoustics Corporation. have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. The results of operations for the interim period ended September 30, 2017 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2017. In the opinion of the Companys management, the information contained herein reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Companys results of operations, financial position and cash flows. The unaudited interim financial statements should be read in conjunction with the audited financial statements in the Companys Form 10-K for the year ended December 31, 2016 filed on March 10, 2017 and Managements Discussion and Analysis of Financial Condition and Results of Operations.
Use of Estimates
The timely preparation of financial statements 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 revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
6
Discontinued Operations
Due to the Change of Control, the operations of the Company prior to the date of the Change of Control are reflected on the financial statements as discontinued operations.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. The Company has cash and cash equivalents of $1 and $0 as of September 30, 2017 and December 31, 2016, respectively. As part of the settlement of debt with Sukiasyan, $500 of cash was netted against the outstanding balance due Sukiasyan on the date of the Change of Control. See Note 4.
Inventory
The Company had $0 and $2,755 in raw materials inventory as of September 30, 2017 and December 31, 2016, respectively. As part of the settlement of debt with Sukiasyan, the inventory was netted against the outstanding balance due Sukiasyan on the date of the Change of Control. See Note 4.
Income Taxes
The Company follows ASC Topic 740 for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of December 31, 2016, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.
Revenue Recognition
The Company recognizes revenue in accordance with ASC topic 605 Revenue Recognition. The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Fair Value of Financial Instruments
AS topic 820 "Fair Value Measurements and Disclosures" establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
The carrying value of cash and the Companys loan from shareholder approximates its fair value due to their short-term maturity.
Stock-Based Compensation
The Company records stock based compensation in accordance with the guidance in ASC 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This requires that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10 and the conclusions reached by the ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505-50.
7
Net Loss Per Share
The Company follows ASC Topic 260 to account for the loss per share. Basic loss per common share calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per common share calculations are determined by dividing net loss by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. There were no potentially dilutive debt or equity instruments issued or outstanding as of September 30, 2017.
Recent Accounting Pronouncements
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company.
NOTE 4 RELATED PARTY TRANSACTIONS
At September 30, 2017 and December 31, 2016 the Company had loans payable to Mr. Sukiasyan, our former sole director of $0 and $24,000, respectively, pursuant to the verbal agreement. This loan was unsecured, non-interest bearing and due on demand. The imputed interest on this note was deemed immaterial. As part of the Change of Control, the balance
$24,000 due to Mr. Sukiasyan was netted against various assets and netted a contribution of $29,895 resulting from the change in control which was recorded to additional paid-in capital. See Notes 3, 5 and 6.
On January 5, 2017, the Company entered into a loan with Mr. Sukiasyan for up to $15,000, of which $12,507 was funded to the Company. This loan was unsecured, non-interest bearing and due on demand. The imputed interest was deemed immaterial. As part of the Change of Control, the balance due of $12,507 was netted against various assets and netted a contribution of $29,895 which was recorded to additional paid-in capital. See Notes 3, 5 and 6.
On February 9, 2017, the Company entered into a loan with the father of Collin McMullen, the sole officer and director of the Company, for $2,500. The loan is unsecured, 10% interest, and is due on demand. The Company entered into additional loan agreements on the same terms on the following dates and for the following amounts: February 16, 2017 for $26,526; March 17, 2017 for $1,700; May 9, 2017 for $1,850; May 25, 2017 for $4,685; and June 23, 2017 for $11,005. The loan balances were paid and reduced by $2,500 on August 4, 2017 and by $7,330 on September 6, 2017. See Note 6.
NOTE 5 FIXED ASSETS
As of September 30, 2017, the Company had no fixed assets. At December 31, 2016, prior to the change in control, the Company had net fixed assets of $3,468.
NOTE 6 NOTES PAYABLE
As of September 30, 2017, the Company had the following notes payable:
On February 9, 2017, the Company entered into a loan with the father of Collin McMullen, the sole officer and director of the Company, for $2,500. The loan is unsecured, 10% interest, and is due on demand. The Company entered into additional loan agreements on the same terms on the following dates and for the following amounts: February 16, 2017 for $26,526; March 17, 2017 for $1,700; May 9, 2017 for $1,850; May 25, 2017 for $4,685; and June 23, 2017 for $11,005. The total principal and accrued interest on these notes as of June 30, 2017 was $48,226 and $1,196, respectively. The loan balances were paid and reduced by $2,500 on August 4, 2017 and by $7,330 on September 6, 2017. See Note 4.
NOTE 7 STOCKHOLDERS EQUITY
The Company has 75,000,000, $0.001 par value shares of common stock authorized.
During January 2016, the company issued a total of 50,000 common shares for cash contribution of $955 at $0.02 per share.
During February 2016, the company issued a total of 525,000 common shares for cash contribution of $10,392 at $0.02 per share.
8
During March 2016, the company issued a total of 25,000 common shares for cash contribution of $500 at $0.02 per share. There were 3,625,000 shares of common stock issued and outstanding as of September 30, 2017.
NOTE 8 COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of its business. The Company is not currently a party to any material legal proceedings, nor is the Company aware of any other pending or threatened litigation that would have a material adverse effect on the Companys business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.
NOTE 9 SUBSEQUENT EVENTS
On October 6, 2017, as a result of a private transaction, the control block of voting stock of Huale Acoustics Corporation., represented by 3,000,000 shares of common stock was transferred from Jaeson Cayne to a syndicated group of investors XU(Purchasers). The consideration paid for the Shares, which represents 82.75% of the issued and outstanding share capital of the Company on a fully-diluted basis, was $342,000. The source of the cash consideration for the shares was personal funds of the Purchasers. In connection with the transaction, Jaeson Cayne and Collin McMullen released the Company from all debts owed. The extinguishment of the Companys accounts payable and related party note payable will be recorded in the quarter ending December 31, 2017.
There are no arrangements or understandings among members of both the former and new control persons and their associates with respect to the election of directors of the Company or other matters. Upon the change of control of the Company the existing director and officer resigned immediately. Accordingly, Collin McMullen, serving as the sole director and as the only officer, ceased to be the Companys President and Principal Accounting Officer. At the effective date of the transfer, XU Dantong consented to act as the new President, CEO, CFO, Treasurer, Secretary and Chairman of the Board of Directors of the Company.
On October 26, 2017, an amendment to the Companys Articles of Incorporation became effective with the State of Nevada. The amendment changed the name of the Company to Huale Acoustics Corporation and increased the number of authorized shares of common stock to 700,000,000 shares and preferred stock to 100,000,000 shares, with par value $0.001 per share.
NOTE 10 RECLASSIFICATION OF DISCONTINUED OPERATIONS
We have reclassified certain prior-period amounts to conform to the current-years presentation. The reclassifications relate to operations which have been discontinued as of the current period due to the change in control.
9