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HUALE ACOUSTICS CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION (form 10-Q)

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08/10/2018 | 12:19pm CEST

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.



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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. Xu Dantong consented to act as the new President, CEO, CFO, Treasurer, Secretary and Chairman of the Board of Directors of the Company.

On October 26, 2017, an amendment to the 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.

As of June 4, 2018, Ms. Xu Dantong resigned from the positions with the Company, including that of Chief Executive Officer, President, Secretary, Treasurer and Chairman of Board of Directors of the Company. The resignation was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices. Ms. Xu Dantong has been the Chief Executive Officer, President, Secretary, Treasure and Chairman of Board of Directors since October 2017.

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



Employees


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

We do not have any union employees.



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Financial Condition - Going Concern

We generated no revenues for the three months ended June 30, 2018 and have recurring net losses for continuing operations for the three months ended June 30, 2018 of $6,979. 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.



RESULTS OF OPERATIONS


Comparison of the three months ended June 30, 2018 and June 3, 2017

Revenues . We did not generate any revenues from continuing operations during the three months ended June 30, 2018 or June 30, 2017. The lack of revenues is primarily attributable to the cessation of our embroidery business upon our change in control in February, 2017.

Cost of Revenues . The Company's cost of revenue was $0 for the three months ended June 30, 2018 and June 30, 2017.

Operating Expenses . Operating expenses for continuing operations for the three months ended June 30, 2018, and 2017, were $6,979 and $29,385, 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 three months ended June 30, 2018, was $6,979, compared with net loss of $30,581 for the three months ended June 30, 2017. The increase in net loss is primarily due to increase in general and administrative expenses.



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Comparison of the six months ended June 30, 2018 and June 30, 2017

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

Cost of Revenues . The Company's cost of revenue was $0 for the six months ended June 30, 2018 and June 30, 2017.

Operating Expenses . Operating expenses for continuing operations for the six months ended June 30, 2018, and 2017, were $17,453 and $48,119, respectively. General and administrative expenses consisted primarily of consulting fees, management fees, and preparing reports and SEC filings relating to being a public company. Operating expenses for discontinued operations for the six months ended June 30, 2018, and 2017, were $0 and $3,365, respectively.

Net Loss . Net loss for continuing operations for the six months ended June 30, 2018, was $17,453, compared with net loss of $53,042 for the six months ended June 30, 2017. The increase in net loss is primarily due to increase in general and administrative expenses. Net loss for discontinuing operations for the six months ended June 30, 2018, was $0, compared with net loss of $3,365 for the six months ended June 30, 2017.

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 June 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.



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Net Cash Used In Operating Activities

During the six months ended June 30, 2018, net cash of $11,199 was used in operating activities for continuing operations compared with $48,481 for the same period ended June 30, 2017. Net cash used by operating activities for continuing operations was related to general and administrative expenses. Net cash used in operating activities for discontinued operations was $0 for the six months ended June 30, 2018 and $9,032 for the period ended June 30, 2017.

Net Cash Used in Investing Activities

During the six months ended June 31, 2018 the Company generated $0 cash from the investing activities of its discontinued operations compare $3,468 the same period ended June 30, 2017.

Net Cash Provided By Financing Activities

During the six months ended June 30, 2018, the Company had cash from financing activities from continuing operations of $11,199 consisting of notes from related parties. During the six months ended June 30, 2017, the Company had cash from financing activities for continuing operations of $48,266 and net cash from financing activities for discontinued operations of $48,266.

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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© Edgar Online, source Glimpses

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