10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2018

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

 

For the transition period from            to            

 

Commission File Number: 333-202841

 

HUALE ACOUSTICS CORPORATION

(Name of small business issuer in its charter)

 

Nevada   36-4797609
(State of incorporation)   (I.R.S. Employer Identification No.)

 

East Room 902, Building 3 East, Saige Sci-Tech. Park

Futian District, Shenzhen, Guangdong

Province, China, 518000

(Address of principal executive offices)

 

(86) 13715017900

(Registrant’s telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

   Large accelerated filer [  ] Accelerated filer [  ]
     
  

Non-accelerated filer [  ]

Smaller reporting company [X]
  (Do not check if a smaller reporting company)  
     
      Emerging growth company [X]

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [  ]

 

As of November 10, 2018, there were 3,625,000 shares of the registrant’s $0.001 par value common stock issued and outstanding.

 

 

 

   
 

 

HUALE ACOUSTICS CORPORATION

 

TABLE OF CONTENTS

 

    Page
PART I. FINANCIAL INFORMATION 1
   
ITEM 1. CONDENSED FINANCIAL STATEMENTS AND NOTES 1
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 11
     
ITEM 4. CONTROLS AND PROCEDURES 11
     
PART II. OTHER INFORMATION 12
   
ITEM 1. LEGAL PROCEEDINGS 12
     
ITEM 1A. RISK FACTORS 12
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 12
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 12
     
ITEM 4. MINE SAFETY DISCLOSURES 12
     
ITEM 5. OTHER INFORMATION 12
     
ITEM 6. EXHIBITS 13

 

   
 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

HUALE ACOUSTICS CORPORATION

 

(F.K.A ILLUMITRY CORP.)

 

Balance Sheets

 

   September 30, 2018   December 31, 2017 
    (Unaudited)    (Audited) 
ASSETS          
Current assets          
Prepaid expenses   2,083    11,458 
Total current assets   2,083    11,458 
Total assets  $2,083   $11,458 
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities          
Accounts Payable   29    - 
Notes payable to related party   34,545    21,346 
Total current liabilities   34,574    21,346 
           
Total liabilities   34,574    21,346 
Stockholders’ deficit          
Preferred stock, $0.001 par value, 100,000,000 shares authorized, 0 shares issued, issuable and outstanding at September 30, 2018 and December 31, 2017, respectively   -    - 
Common stock, $0.001 par value, 700,000,000 shares authorized, 3,625,000 shares issued, issuable and outstanding at September 30, 2018 and December 31, 2017 , respectively   3,625    3,625 
Additional paid-in capital   100,353    100,353 
Accumulated deficit   (136,469)   (113,866)
Total stockholders’ deficit   (32,491)   (9,888)
Total liabilities and stockholders’ deficit  $2,083    11,458 

 

 1 
 

 

HUALE ACOUSTICS CORPORATION

 

(F.K.A ILLUMITRY CORP.)

 

Statements of Operations

 

For the Three Months and Nine Months Ended September 30, 2018 and 2017

 

(unaudited)

 

  

Three months Ended September 30

  

Nine months Ended September 30

 
   2018   2017   2018   2017 
                 
REVENUES  $-   $-   $-   $- 
Cost of goods sold   -    -    -    - 
Gross profit   -    -    -    - 
OPERATING EXPENSES                    
General and administrative expenses   (5,150)   (20,442)   (22,603)   (68,561)
TOTAL OPERATING EXPENSES   (5,510)   (20,442)   (22,603)   (68,561)
Other income (expense):                    
Interest expense   -    (1,132)   -    (2,690)
Total other income (expense)   -    (1,132)   -    (2,690)
Net loss from continuing operations   (5,510)   (21,574)   (22,603)   (71,251)
Discontinued operations:                    
Income (loss) from discontinued operations   -    -    -    (3,365)
Net income (loss)  $(5,510)  $(21,574)  $(22,603)  $(74,616)
Net Loss per share, basic and diluted                    
From continuing operations  $(0.01)  $(0.01)  $(0.01)  $(0.02)
From discontinued operations   -    -    -    - 
Weighted Average Number of shares outstanding   3,625,000    3,625,000    3,625,000    3,625,000 

 

 2 
 

 

HUALE ACOUSTICS CORPORATION

 

(F.K.A ILLUMITRY CORP.)

 

Statements of Cash Flows

 

For the Nine Months Ended September 30, 2018 and 2017

 

(unaudited)

 

   Nine months Ended September 30, 
   2018   2017 
Cash flows from operating activities:          
Net loss from continuing operations  $(22,603)  $(71,251)
Prepaid expenses   9,375    - 
Changes in assets and Liabilities   29    17,988 
Accrued interest - related party   -    2,328 
Net cash used in operating activities - continuing operations   (13,199)   (50,935)
Adjustments to reconcile net loss to net cash provided by discontinued operations:          
Net loss from discontinued operations   -    (3,365)
Current assets   -    6,502 
Current liabilities   -    5,895 
Net cash provided by (used in) operating activities - discontinued operations   -    9,032 
Net cash used in operating activities   (13,199)   (41,903)
Net cash generated from investing activities – discontinued operations   -    3,468 
Net cash used in investing activities - continuing operations   -    - 
Cash flows from financing activities - continuing operations:          
Proceeds from note payable - related party   13,199    38,436 
Net cash provided by financing activities - continuing operations   13,199    38,436 
Net cash provided by financing activities - discontinued operations   -    - 
Net cash provided by financing activities   13,199      
Net increase (decrease) in cash   -    1 
Cash at beginning of period   -    - 
Cash at end of period  $-   $1 
Non-cash investing and financing activities:          
Related party contribution to paid in capital  $-   $29,895 

 

 3 
 

 

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. Dantong 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 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.

 

On June 4, 2018, Ms. Dantong Xu 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. Dantong Xu has been the Chief Executive Officer, President, Secretary, Treasure and Chairman of Board of Directors since October 2017.

 

On June 4, 2018, the Board of Director appointed Mr. Zhicheng Huang as our new Chief Executive Officer, President, Secretary, Treasurer and Chairman of Board of Directors of the Company .

 

On September 10, 2018, Mr. Zhicheng Huang acquired 2,250,000 shares of Common Stock from Ms. Dantong Xu, a shareholder of the Issuer for the aggregate amount of $2,250, or $0.001 per share, the par value of the Common Stock.

 

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, 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.

 

 4 
 

 

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, 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 $0 as of September 30, 2018 and December 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, 2017 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 the Company’s loan from shareholder approximates its fair value due to their short-term maturity.

 

 5 
 

 

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 September 30, 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

 

The Company had notes payable amounting $32,545 and $21,346 due to Ms. Dantong Xu, the Company’s former Chief Executive Officer and controlling shareholder at September 30, 2018 and December 31, 2017 respectively.

 

The Company had notes payable amounting $2,000 and $nil due to Mr. Zhicheng Huang, the Company’s current Chief Executive Officer and controlling shareholder at September 30, 2018 and December 31, 2017 respectively.

 

These notes payables were unsecured, non-interest bearing and due on demand. The imputed interest on this note was deemed immaterial.

 

NOTE 5 – FIXED ASSETS

 

The Company had no fixed assets as of September 30, 2018 and December 31, 2017.

 

NOTE 6 – NOTES PAYABLE

 

The Company had notes payable amounting $32,545 and $21,346 due to Ms. Dantong Xu, the Company’s former Chief Executive Officer and controlling shareholder at September 30, 2018 and December 31, 2017 respectively.

 

The Company had notes payable amounting $2,000 and $nil due to Mr. Zhicheng Huang, the Company’s current Chief Executive Officer and controlling shareholder at September 30, 2018 and December 31, 2017 respectively.

 

These notes payables were unsecured, non-interest bearing and due on demand.

 

NOTE 7 – STOCKHOLDERS’ EQUITY

 

The Company has 700,000,000, $0.001 par value shares of common stock authorized and preferred stock, $0.001 par value, 100,000,000 shares authorized.

 

There were 3,625,000 shares of common stock issued and outstanding as at December 31, 2017 and September 30, 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

 

The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.

 

The Company has evaluated subsequent events through the date the financial statements were issued and up to the time of filing with the SEC and has determined that were no material subsequent events that came to management’s attention that required disclosure.

 

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.

 

 6 
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

Overview

 

Huale Acoustics Corporation (formerly known as Illumitry Corp.), was incorporated in the State of Nevada on October 17, 2014, and established a fiscal year end of December 31. We generated limited revenues, have minimal assets and have incurred losses since inception. We were formerly in cloth and fabric embroidery business in Armenia.

 

On February 7, 2017 (the date of the “Change of Control”), Jaeson Cayne (“Cayne”), 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. As a result of the Change in Control, the Company ceased its cloth and fabric embroidery business in Armenia.

 

On February 21, 2017, (i) Arusyak Sukiasyan resigned from all positions with the Company, including the sole member of the Company’s Board of Directors and the Company’s President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer. The resignation of Sukiasyan was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. On February 21, 2017, Mr. Collin McMullen was appointed to the Company’s Board of Directors and as the Company’s President, Chief Executive Officer, Chief Financial Officer, Treasurer, and Secretary.

 

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.

 

 7 
 

 

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 (“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.

 

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 Company’s President and Principal Accounting Officer. At the effective date of the transfer, Ms. Dantong Xu 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 Company’s 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.

 

On June 4, 2018, Ms. Dantong Xu resigned from her position 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. Dantong Xu has been the Chief Executive Officer, President, Secretary, Treasure and Chairman of Board of Directors since October 2017.

 

On June 4, 2018, the Board of Director appointed Mr. Zhicheng Huang as the new Chief Executive Officer, President, Secretary, Treasurer and Chairman of Board of Directors of the Company.

 

On September 10, 2018, Mr. Zhicheng Huang acquired 2,250,000 shares of Common Stock from Ms. Dantong Xu, a shareholder of the Issuer for the aggregate amount of $2,250, or $0.001 per share, the par value of the Common Stock.

 

Employees

 

We currently do not have any full time or part time employees. Our former Chief Executive Officer, Chief Financial Officer, and Secretary, Ms. Dantong Xu carried out all administrative functions and stepped down on June 4, 2018. Mr. Zhicheng Huang was appointed the new Chief Executive Officer, President, Secretary, Treasurer and Chairman of Board of Directors of the Company and carried out all administrative functions with effect from June 4, 2018.

 

We do not have any union employees.

 

Financial Condition – Going Concern

 

We did not generate any revenues for the nine months ended September 30, 2018 and had recurring net losses for continuing operations for the nine months ended September 30, 2018 of $22,603. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to continue its operations is dependent on the execution of management’s plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company was not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the financial statements.

 

There can be no assurances that the Company will be successful in generating additional cash from the equity/debt markets or other sources to be used for operations. The financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Based on the Company’s current resources, the Company will not be able to continue to operate without additional immediate funding. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

 

 8 
 

 

RESULTS OF OPERATIONS

 

Comparison of the nine months ended September 30, 2018 and September 30, 2017

 

Revenues. We did not generate any revenues from continuing operations during the nine months ended September 30, 2018 or September 30, 2017.

 

Cost of Revenues. The Company’s cost of revenue was $0 for the nine months ended September 30, 2018 and September 30, 2017.

 

Operating Expenses. Operating expenses for continuing operations for the nine months ended September 30, 2018, and 2017, were $20,442 and $68,561, respectively. General and administrative expenses consisted primarily of consulting fees, management fees, and preparing reports and SEC filings relating to being a public company.

 

Net Loss. Net loss for continuing operations for the nine months ended September 30, 2018, was $21,574, compared with net loss of $74,616 for the nine months ended September 30, 2017. The increase in net loss is primarily due to decrease in general and administrative expenses.

 

Liquidity and Capital Resources

 

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. For these reasons our auditors stated in their report on our audited financial statements for the year ended December 31, 2017 that they have substantial doubt we will be able to continue as a going concern.

 

As of September 30, 2018, the Company had $0 in cash. We do not have sufficient resources to effectuate our business. We expect to incur a minimum of $50,000 in expenses during the next twelve months of operations. We expect that these expenses will be comprised primarily of general expenses including overhead, legal and accounting fees.

 

We have not paid dividends on our Common Stock. Our present policy is to apply cash to investments in product development, acquisitions or expansion; consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.

 

The success of our business strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and loans from executive officers and other third parties. There can be no assurance that we can raise such additional capital resources on satisfactory terms. We believe that our current cash and other sources of liquidity discussed below are adequate to support operations for at least the next 12 months. We anticipate continuing to rely on equity sales of our common shares and shareholder loans in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our plan of operations.

 

 9 
 

 

Net Cash Used In Operating Activities

 

During the nine months ended September 30, 2018, net cash of $13,199 was used in operating activities for continuing operations compared with $50,935 for the same period ended September 30, 2017. Net cash used by operating activities for continuing operations was related to general and administrative expenses.

 

Net Cash Used in Investing Activities

 

During the nine months ended September 30, 2018 the Company generated $0 cash from the investing activities of its discontinued operations compare $3,468 the same period ended September 30, 2017.

 

Net Cash Provided By Financing Activities

 

During the nine months ended September 30, 2018, the Company had cash from financing activities from continuing operations of $13,199 consisting of notes from related parties. During the nine months ended September 30, 2017, the Company had cash from financing activities for continuing operations of $38,436

 

Off Balance Sheet Arrangements

 

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions. See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3, “Summary of Significant Accounting Policies” in our audited financial statements for the year ended December 31, 2017, included in our Annual Report on Form 10-K as filed on May 30, 2018, for a discussion of our critical accounting policies and estimates.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2018, due to the following deficiencies which represent a material weakness:

 

  1. Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
     
  2. Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
     
  3. Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.

 

To remediate our internal control weaknesses, management intends to implement the following measures upon the acquisition of an operating business:

 

  The Company will add sufficient number of independent directors to the board and appoint additional member(s) to the Audit Committee.
     
  The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.
     
  The Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting.
     
  Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

 

The additional hiring is contingent upon the Company’s efforts to obtain additional funding through equity or debt and the results of its operations. There can be no assurance that the Company will be able to secure the necessary funds. Please refer to our Annual Report on Form 10-K as filed with the SEC on May 30, 2018 for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.

 

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Changes in Internal Control Over Financial Reporting

 

There are no changes in our internal controls over financial reporting other than as described elsewhere herein.

 

Limitations on the Effectiveness of Controls

 

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no pending legal proceedings in which we are a party or in which any of our directors, officers or affiliates, any owner of record or beneficiary of more than 5% of any class of our voting securities is a party adverse to us or has a material interest adverse to us.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

Changes in Registrant’s Certifying Accountants

 

On June 13, 2018, the company dismissed Heaton & Company, PLLC, dba Pinnacle Accountancy Group of Utah as its independent registered accounting firm and engaged PAN-CHINA SINGAPORE PAC (PCCPA), as its new independent registered accounting firm.

 

Since Heaton & Company’s appointment as our independent registered accounting firm on March 21, 2018 and through June 13, 2018, which included its reviews of our annual financial statements for the years ended December 31, 2017, there were (i) no disagreements between the Company and Heaton & Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement, if not resolved to the satisfaction of Heaton & Company, would have caused Heaton & Company to make reference thereto in their reports on the financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

 

The Company provided Heaton & Company with a copy of the 8-K report and Amendment No.1 of the 8-K report and requested that Heaton & Company furnish it with a letter addressed to the SEC stating whether or not Heaton & Company agrees with the above statements.

 

During years ended December 31, 2016 and 2015 and in the subsequent interim period through June 13, 2018, the Company has not consulted with PCCPA regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Heaton & Company concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

 

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ITEM 6. EXHIBITS

 

Exhibit No.   Description
3.1   Articles of Incorporation dated October 17, 2014 (incorporated by reference to our Form S-1 Registration Statement, Exhibit 3.1, filed with the Securities and Exchange Commission on March 18, 2014)
3.2   Bylaws (incorporated by reference to our Form S-1 Registration Statement, Exhibit 3.2, filed with the Securities and Exchange Commission on March 18, 2014)
31.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
101.INS   XBRL Instance Document **
101.SCH   XBRL Taxonomy Extension Schema Document **
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document **
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document **
101.LAB   XBRL Taxonomy Extension Label Linkbase Document **
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document **

 

* Filed herewith.
** Furnished herewith.

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    HUALE ACOUSTICS CORPORATION  
     
Dated: November 14, 2018    
    /s/ Zhicheng Huang
    Zhicheng Huang  
  Title: President, CEO, CFO, Treasurer, Secretary, Director  

 

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