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 Company’s issued and outstanding
common stock, representing approximately 83% of the Company’s 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. (formerly
known as Illumitry Corp.) presented by 3,000,000 shares of common stock was transferred from Jaeson Cayne to a syndicated group
of investors led by Ms. Xu Dantong (“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 Company’s accounts payable and related party note payable was
recorded as of the date of the transaction.
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.
As
of June 4, 2018, Ms. Xu Dantong resigned from her positions with the Company, including that of Chief Executive Officer, President,
Secretary,Treasurer and Chairman of Board of Directors of the Company. The resignation was not the result of any disagreement
with the Company on any matter relating to the Company’s operations, policies or practices. Ms. Xu Dantong has been the
Chief Executive Officer, President, Secretary, Treasure and Chairman of Board of Directors since October 2017.
As
of June 4, 2018, the Board of Director appointed Mr. Huang Zhicheng as new Chief Executive Officer, President, Secretary, Treasurer
and Chairman of Board of Directors of the Company.
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 March 31,
2018.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 Company’s 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 management’s 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 March 31, 2018 shown in this report are not necessarily indicative of results.
In the opinion of the Company’s management, the information contained herein reflects all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the Company’s 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 Company’s Form 10-K for the year ended December 31, 2017 filed on May 30, 2018 and Management’s 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.
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 $0 and $24,985 as of March 31, 2018 and March 31, 2017, respectively.
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, 2018 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 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
ASC
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 Company’s 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.
Net
Loss Per Share
The
Company follows ASC 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 March 31, 2018.
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
March 31, 2018 and December 31, 2017 the Company had loans payable to Ms. Xu Dantong, our former sole director of $28,695 and
$21,346, respectively, pursuant to a 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 a Change of Control, the balance $24,000 due to Sukiasyan was netted against
various assets and netted a contribution of $29,895, which was recorded to additional paid-in capital.
On
February 9, 2017, the Company entered into a loan with the father of Collin McMullen, the former officer and former director of
the Company, for $2,500. The loan was unsecured, with 10% interest, and was 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. According to the terms of the Stock Purchase Agreement
dated October 6, 2017, the remaining balances of these loans were retained by the selling shareholders and recorded as additional
capital contribution at closing, totaling $58,751.
Ms.
Xu Dantong, the Company’s former Chief Executive Officer and controlling shareholder, subsequently loaned $28,695 to the
Company between October 6, 2017 and March 31, 2018 as part of continuing operations. This loan is unsecured, non-interest bearing
and due on demand.
NOTE
5 – FIXED ASSETS
As
of March 31, 2018 and December 31, 2017 the Company had no fixed assets.
NOTE
6 – NOTES PAYABLE
As
of March 31, 2018, the Company had a note payable to Ms. Xu Dantong, the Company’s former Chief Executive Officer and controlling
shareholder, in the amount of $28,695. This loan is unsecured, non-interest bearing and due on demand. As of December 31, 2017,
the Company had a note payable of $21,346
NOTE
7 – STOCKHOLDERS’ EQUITY
The
Company has 100,000,000, $0.001 par value shares of common stock authorized.
There
were 3,625,000 shares of common stock issued and outstanding as at December 31, 2017 and March 31, 2018 .
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 Company’s business, operating results, cash flows
or financial condition should such litigation be resolved unfavorably.
NOTE
9 – SUBSEQUENT EVENTS
As
of June 4, 2018, Ms. Xu Dantong resigned from the positions with the Company, including that of Chief Executive Officer, President,
Secretary, Treasurer and Chairman of Board of Directors of the Company. The resignation was not the result of any disagreement
with the Company on any matter relating to the Company’s operations, policies or practices. Ms. Xu Dantong has been the
Chief Executive Officer, President, Secretary, Treasure and Chairman of Board of Directors since October 2017.
As
of June 4, 2018, the Board of Director appointed Mr. Huang Zhicheng as new Chief Executive Officer, President, Secretary, Treasurer
and Chairman of Board of Directors of the Company.
NOTE
10 – RECLASSIFICATION OF DISCONTINUED OPERATIONS
We
have reclassified certain prior-period amounts to conform to the current-year’s presentation. The reclassifications relate
to operations which have been discontinued as of the current period due to the change in control.