Item 1. Description of Business
FORWARD-LOOKING STATEMENTS
Statements made in this Form 10-K that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
Financial information contained in this report and in our financial statements is stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
COMPANY
Huale Acoustics Corporation., formerly Duonas Corp. (“we,” “us,” “our,” or the “Company”), was incorporated in the State of Nevada on October 17, 2014 and established a fiscal yearend of December 31. We have generated limited revenues, have minimal assets and have incurred losses since inception. We are a company formed to commence operations in a field of embroidery on fabric and cloth in Armenia.
On February 21, 2017, Ms. 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 Ms. 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.
Upon the change of control of the Company, which occurred on October 6, 2017, 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, XU Dantong consented to act as the new President, CEO, CFO, Treasurer, Secretary and Chairman of the Board of Directors of the Company.
OUR BUSINESS
Through October 6, 2017, the Company’s primary business activity was to commence operations in a field of embroidery on fabric and cloth in Armenia. Going forward, the Company’s operations will be determined and structured by the new investor group. As such, at December 31, 2017, the Company accounted for all of its assets, liabilities and results of operations up to October 6, 2017 as discontinued operations.
INSURANCE
We do not maintain any insurance and do not intend to maintain insurance in the future. Because we do not have any insurance, if we are made a party to a products liability action, we may not have sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us that could cause us to cease operations.
EMPLOYEES
We are a development stage company and currently have no employees, other than our sole officer and director, Xu Dantong.
OFFICES
Our business office is located East Room 902, Building 3 East, Saige Sci-Tech. Park, Futian District, Shenzhen, Guangdong Province, China, 518000 China. Our phone number is (86) 13715017900.
GOVERNMENT REGULATION
We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to our business in any jurisdiction which we would conduct activities. We do not believe that regulation will have a material impact on the way we conduct our business.
Item 1A.
Item 1A. Risk Factors
Not applicable to Emerging growth companies.
Item 1B.
Item 1B. Unresolved Staff Comments
Not applicable to Emerging growth companies .
Item 2.
Item 2. Description of Property
We do not own any real estate or other properties.
Item 3.
Item 3. Legal Proceedings
We know of no legal proceedings to which we are a party or to which any of our property is the subject which are pending, threatened or contemplated or any unsatisfied judgments against us.
Item 4.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
Our common stock is currently quoted on the OTCQB under the trading symbol “HYAS.” Our common stock did not trade prior to November 22, 2016.
Trading in stocks quoted on the OTCQB is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects. We cannot assure you that there will be a market for our common stock in the future.
For the periods indicated, the following table sets forth the high and low bid prices per share of common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Our common stock did not trade prior to November 22, 2016.
Number of Holders
As of December 31, 2017, the 3,625,000 issued and outstanding shares of common stock were held by a total of 36 shareholder of record.
Dividends
No cash dividends were paid on our shares of common stock during the fiscal year ended December 31, 2017 and 2016. We have not paid any cash dividends since October 17, 2014 (inception) and do not foresee declaring any cash dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
The Company has 700,000,000, $0.001 par value shares of common stock authorized and 100,000,000, $0.001 par value preferred shares authorized.
There were no recent sales of unregistered securities.
There were 3,625,000 shares of common stock issued and outstanding as of December 31, 2017.
Purchase of our Equity Securities by Officers and Directors
We have not repurchased any shares of our common stock during the fiscal year ended December 31, 2017.
Other Stockholder Matters
None.
Item 6.
Item 6. Selected Financial Data
We are a emerging growth 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 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
RESULTS OF OPERATIONS
We have incurred recurring losses to date. 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.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
FISCAL YEAR ENDED DECEMBER 31, 2017 COMPARED TO DECEMBER 31, 2016
Revenue
For the year ended December 31, 2017 and 2016 the Company generated no revenue from continuing operations.
Operating expenses Need to describe operating expenses classified as discontinued operations.
Total operating expenses for the year ended December 31, 2017 and 2016, were $1,041 and $0 respectively. The operating expenses for the year ended December 31, 2016 was reclassified to discontinued operations due to the change in control.
Net Losses
The net losses from operations for the years ended December 31, 2017 and 2016 was $17,991 and $0, respectively. The net losses from discontinued operations for the years ended December 31, 2017 and 2016 was $77,971 and $20,384, respectively.
Liquidity and Capital Resources
On October 6, 2017, as a result of a private transaction, the control block of voting stock of Illumitry Corp., represented by 3,000,000 shares of common stock was transferred from Jaeson Cayne to a syndicated group of investors led by 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.
As of December 31, 2017, our total assets were $11,458 and our total liabilities were $21,346 comprised of a loan from former director. As of December 31, 2016, our total assets were $9,970 comprised of current assets from discontinued operations of $6,502, and non-current assets from discontinued operations of $3,468. Our total liabilities fom discontinued operation were $24,000 comprised of a loan from former director .
Shareholders’ equity has increased from a deficit of $14,030 as of December 31, 2016 to a deficit of $9,888 as of December 31, 2017. Deficit was due to the increase in operating expenses.
The Company has accumulated a deficit of $113,866 as of December 31, 2017 compared to a deficit of $29,362 as of December 31, 2016 and further losses are anticipated in the development of its business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, sales, loans from directors and, or, the private placement of common stock.
Because of the Company’s history of losses, its independent auditors, in the reports on the financial statements for the years ended December 31, 2017 and December 31, 2016, expressed substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.
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 may 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.
Cash Flows from Operating Activities
For the fiscal year ended December 31, 2017, net cash flows used in operating activities was $59,742 compared to $0 for December 31, 2016.
Cash Flows from Investing Activities
We have used $0 in investing activities for the fiscal year ended December 31, 2017, and $0 as of December 30, 2016.
Cash Flows from Financing Activities
We have financed our operations primarily from the proceeds from capital contributions. For the fiscal year ended December 31, 2017, net cash from financing activities was $59,742, consisting of capital contributions $38,396 and note payable related party $21,346. For the fiscal year ended December 31, 2016, net cash from financing activities was $24,947 consisting of common stock sales $24,947 consisting of share issuances for $600, additional paid in capital $11,247 and a loan from a director $13,100.
PLAN OF OPERATION AND FUNDING
Our cash reserves are not sufficient to meet our obligations for the next twelve months period. As a result, we will need to seek additional funding in the near future. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of shares of our common stock, from selling our products and from our sole officer and director loan.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
GOING CONCERN
The Company has generated limited revenues and incurred a loss since Inception (October 17, 2014) resulting in an accumulated deficit of $113,866 as of December 31, 2017 and further losses are anticipated in the development of its business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.
Because of the Company’s history of losses, its independent auditors, in the reports on the financial statements for the year ended December 31, 2017 and 2016, expressed substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We do not believe that any accounting policies currently fit this definition.
Recently Issued Accounting Pronouncements
Our management has considered all recent accounting pronouncements issued since the last audit of our financial statements. Our management believes that these recent pronouncements will not have a material effect on our financial statements.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable to Emerging growth companies.
Item 8.
Item 8. Financial Statements and Supplementary Data
HUALE ACOUSTICS CORPORATION.
(F.K.A ILLUMITRY CORP.)
FINANCIAL STATEMENTS
For the Years Ended December 31, 2017 and December 31, 2016
MICHAEL GILLESPIE & ASSOCIATES, PLLC
CERTIFIED PUBLIC ACCOUNTANTS
ALTON AVE NE
SEATTLE, WA 98125
206.353.5736
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Illumitry Corp.
We have audited the accompanying balances sheet of Illumitry Corp. as of December 31, 2016 and the related statements of operations, stockholders’ deficit and cash flows for the period then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of Illumitry Corp. for the year ended December 31, 2016 and the results of its operations and cash flows for the year then ended in conformity with generally accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note #2 to the financial statements, although the Company has limited operations it has yet to attain profitability. This raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note #2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ MICHAEL GILLESPIE & ASSOCIATES, PLLC
Seattle, Washington
February 24, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Huale Acoustics Corp.
East Room 902, Building 3 East, Saige Sci-Tech, Park
Futian District, Shenzhen, Guangdong
Province, China, 518000 China
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Huale Acoustics Corp., (the Company) as of December 31 2017, and the related statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and has no operations which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Pinnacle Accountancy Group of Utah
We have served as the Company’s auditor since March 2018.
Pinnacle Accountancy Group of Utah
Farmington, Utah
May 29, 2018
HUALE ACOUSTICS CORPORATION.
(F.K.A ILLUMITRY CORP.)
BALANCE SHEETS
See accompanying notes to audited financial statements.
HUALE ACOUSTICS CORPORATION.
(F.K.A ILLUMITRY CORP.)
STATEMENTS OF OPERATIONS
See accompanying notes to audited financial statements.
HUALE ACOUSTICS CORPORATION.
(F.K.A ILLUMITRY CORP.)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
See accompanying notes to audited financial statements.
HUALE ACOUSTICS CORPORATION.
(F.K.A ILLUMITRY CORP. )
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2017 AND 2016
(AUDITED)
See accompanying notes to audited financial statements.
HUALE ACOUSTICS CORPORATION.
(F.K.A ILLUMITRY CORP.)
NOTES TO THE AUDITED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND DECEMBER 31, 2016
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
Huale Acoustics Corporation was formed as Illumitry Corp. (“the Company,” “we,” “us,” or “our”) and 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 Illumitry Corp., represented by 3,000,000 shares of common stock was transferred from Jaeson Cayne to a syndicated group of investors led by 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.
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, Xu 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.
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 no revenues and incurred losses as of December 31, 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 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 financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company for the year ended December 31, 2017 and December 31, 2016.
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 had cash and cash equivalents of $0 and $3,463 as of December 31, 2017 and December 31, 2016, respectively.
Prepaid Expenses
The Company had prepaid certain filing fees of $11,458 as of December 31, 2017, of which covers OTC Markets service fee for the period covering from December 1, 2017 to November 30, 2018 originally amounted to $12,500.
Inventory
The Company had $0 and $2,755 in raw materials inventory as of December 31, 2017 and December 31, 2016 (included in discontinued net assets), 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 also 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, 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 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 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 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 December 31, 2017 and 2016.
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 December 31, 2017 and December 31, 2016, the Company had loans payable to Ms. 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 of $24,000 due to Ms. Sukiasyan was offset against various net liabilities (assets minus liabilities) resulting in a capital contribution of $29,895 from the change in control which was recorded to additional paid-in capital.
On January 5, 2017, the Company entered into a loan with Ms. 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.
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, the Company’s Chief Executive Officer and controlling shareholder, subsequently loaned $21,346 to the Company between October 6, 2017 and December 31, 2017 as part of continuing operations. This loan is unsecured, non-interest bearing and due on demand.
NOTE 5 - FIXED ASSETS
As of December 31, 2017, the Company had no fixed assets. At December 31, 2016, the Company had net fixed assets of $3,468.
NOTE 6 - NOTES PAYABLE
As of December 31, 2017, the Company had a note payable to Ms. Xu, the Company’s Chief Executive Officer and controlling shareholder, in the amount of $21,346. This loan is unsecured, non-interest bearing and due on demand. As of December 31, 2016, the Company had a note payable of $0.
NOTE 7 - STOCKHOLDERS’ EQUITY
The Company has 700,000,000, $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.
During March 2016, the Company issued a total of 25,000 common shares for cash contribution of $500 at approximately $0.02 per share.
There were 3,625,000 shares of common stock issued and outstanding as of December 31, 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 Company’s business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.
NOTE 9 - 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.
Through October 6, 2017, the Company’s primary business activity was to commence operations in a field of embroidery on fabric and cloth in Armenia. Going forward, the Company’s operations will be determined and structured by the new investor group. As such, at December 31, 2017, the Company accounted for all of its assets, liabilities and results of operations up to October 6, 2017 as discontinued operations.
NOTE 10 - SUBSEQUENT EVENTS
In accordance with ASC 855-10 the Company has analyzed its operations from December 31, 2017 to the date of when the financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A
Item 9A Controls and Procedures
Management’s Report on Internal Controls over Financial Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 using the criteria established in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2017, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
1. We do not have an Audit Committee - While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities.
2. We did not maintain appropriate cash controls - As of December 31, 2017, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company’s bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts.
3. We did not implement appropriate information technology controls - As at December 31, 2017, the Company retains copies of all financial data and material agreements; however, there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors.
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2017 based on criteria established in Internal Control- Integrated Framework issued by COSO.
System of Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2017. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
CHANGES IN CONTROL OF REGISTRANT
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.
On October 6, 2017, as a result of a private transaction, the control block of voting stock of Illumitry Corp. (the “Company”), represented by 3,000,000 shares of common stock (the “Shares”), has been transferred from Jaeson Cayne to XU DANTONG, PENG SHUANGQUAN, PAN HONGZHI, HUANG WEIXIANG, ZHANG DONG, GUO XIAOHUA, XU HANSONG, ZHAO YANXIA, GUO YUFEN, GUO YUHUA, GUO QIONGYAN, QIN DONGLI, HU MEIQIN, CHENG XIAOPING, LI CHENGLIAN, SUN CHANGHUA, LAI LIUFANG, YE ZHONGSONG, SHAN LIQING, CHEN XIAOWEN, QIN YUMEI, CHENG JINCAI, XIAN QIONGREN, LUO HUAZHEN, ZHOU YONG, HE GUIFANG, CHEN JIAN, LI DAYONG, TANG HUA, LI QIYING and YANG JINBO (the “Purchasers), and a change of control of the Company occurred. The consideration paid for the Shares, which represent 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.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS
Upon the change of control of the Company, which occurred on October 6, 2017, 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. The resignation of Collin McMullen was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
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.
There are no family relationships between the Designees.
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons of the Company
DIRECTORS AND EXECUTIVE OFFICERS
The name, age and titles of our sole officer and director are as follows:
Name and Address of Executive
Officer and/or Director
Age
Position
XU Dantong
President, Treasurer, Secretary and Director
(Principal Executive, Financial and Accounting Officer)
Biographical Information and Background of officer and director
Ms. XU Dantong, age 27, obtained her highest degree in 2016 from South China Normal University in China with a Bachelor degree in Human Resource Management.
Since March 2012, Ms. XU started her first job in Shenzhen Kingkey Banner Commercial Management Co., Ltd, as a general manager secretary and human resources administrator. As a human resource administrator, she handled the recruitment affairs and employee remuneration part during her service. At the same time, she has performed as a general manager secretary, which was responsible for internal and external communication between colleagues and third parties respectively. Furthermore, she travels frequently with general managers for following up the business development projects.
She had started her Bachelor degree in Human Resource Management in South China Normal University since July 2012, and she graduated in December 2016.
After 5 years’ experience in human resource, internal and external affairs management, Ms. XU has been appointed as a Chief Executive Officer, President, Secretary, Treasure and Chairman of Board of Directors in October 2017.
During the past ten years, XU DAN TONG has not been the subject to any of the following events:
1. Any bankruptcy petition filed by or against any business of which Ms. XU Dantong was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
2. Any conviction in a criminal proceeding or being subject to a pending criminal proceeding.
3. An order, judgment, or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting Ms. XU Dantong involvement in any type of business, securities or banking activities.
4. Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Future Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
5. Was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
6. Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
7. Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
i. Any Federal or State securities or commodities law or regulation; or
ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
8. Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
AUDIT COMMITTEE
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we have no operations, at the present time, we believe the services of a financial expert are not warranted.
SIGNIFICANT EMPLOYEES
We have no employees other than our sole director Ms. Xu Dantong. We intend to hire employees on an as needed basis.
Item 11.
Item 11. Executive Compensation
The following tables set forth certain information about compensation paid, earned or accrued for services by our President, and Secretary (collectively, the “Named Executive Officers”) from inception on October 6, 2017 until December 31, 2017:
Summary Compensation Table
There are no current employment agreements between the company and its officers. The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer. There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than as described herein.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of May 17, 2018 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) our director, and or (iii) our officer. Unless otherwise indicated, the stockholder listed possesses sole voting and investment power with respect to the shares shown.
The percent of class is based on 3,625,000 shares of common stock issued and outstanding as of the date of this annual report.
Item 13.
Item 13. Certain Relationships and Related Transactions
During the year ended December 31, 2017, we had not entered into any transactions with our sole officer or director, or persons nominated for these positions, beneficial owners of 5% or more of our common stock, or family members of these persons wherein the amount involved in the transaction or a series of similar transactions exceeded the lesser of $120,000 or 1% of the average of our total assets for the last three fiscal years.
As of December 31, 2017, a director had loaned $21,346 (December 31, 2016 - $24,000) to the Company to provide working capital for its business operations. The loan is unsecured, non-interest bearing and due on demand.
PART IV
Item 15.
Item 15. Exhibits
The following exhibits are included as part of this report by reference:
31.1
Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1
Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.