**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-K**

 

**  ****x Annual Report under Section 13 or 15(d) of the Securities**
**Exchange Act of 1934**

 

**For the fiscal year ended June 30, 2011**

**or**

 **o Transitional Report under Section 13 or 15(d) of the**
**Securities Exchange Act of 1934**

**333-153575**

Commission file number

 

**HIGHLIGHT NETWORKS, INC.**

(Exact name of small business issuer as specified in its charter)

 

**Nevada**

 

**26-1507527**

(State of incorporation)

 

(IRS Employer Identification Number)

 

**215 South Riverside Dr. Suite 12 Cocoa, FL  32922**

(Address of principal executive office)

 

**(321) 684-5721**

(Issuer's telephone number)

 

**Securities registered under Section 12(b) of the Exchange Act: NONE**

 

**Securities registered under Section 12(g) of the Exchange Act:**

 

Common Stock: $.001 Par Value

(Title of Class)

Indicate by check mark whether the registrant if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act   Yes o No **x**

Indicate by check mark whether the registrant if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act  Yes o No **x**

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 o

Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (check one)

 
Large Accelerated Filer o

Accelerated Filer o

Non-accelerated Filer o

Smaller Reporting Company **x**

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

As of June 30, 2011 there were outstanding 2,419,600 shares of Highlight Networks, Inc.'s common stock, par value $.001 per share (the "Common Stock").  
**HIGHLIGHT NETWORKS, INC.**

 

**Form 10-K**

** **

**Report for the Fiscal Year**

** Ended June 30, 2011**

**PART I**

PAGE

 

 

Item 1.    Business

3

Item 2.    Properties

6

Item 3.    Legal Proceedings

6

Item 4.    [REMOVED AND RESERVED]

6

 

 

**PART II**

 

 

 

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters and Issuer Purchases of Equity Securities

7

Item 6. Selected Financial Data

7

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

8

Item 8. Financial Statements and Supplementary Data

10

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

10

Item 9A. Controls and Procedures

10

 

 

**PART III**

 

 

 

Item 10. Directors and Executive Officers of the Registrant

12

Item 11. Executive Compensation

13

Item 12. Security Ownership of Certain Beneficial Owners and Management

13

Item 13. Certain Relationships and Related Transactions

14

Item 14. Principal Accountant Fees and Services

15

Item 15. Exhibits

16

 Financial Statements and Notes to Financial Statements

17-31

Signatures

32

  

  

 

 

2

 

**PART I**

THE INFORMATION IN THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, INCLUDING STATEMENTS REGARDING THE COMPANY'S CAPITAL NEEDS, BUSINESS STRATEGY AND EXPECTATIONS. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACTS MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS "MAY", "WILL", "SHOULD", "EXPECT", "PLAN", "INTEND", "ANTICIPATE", "BELIEVE", "ESTIMATE", "PREDICT", "POTENTIAL" OR "CONTINUE", THE NEGATIVE OF SUCH TERMS OR OTHER COMPARABLE TERMINOLOGY. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING THESE STATEMENTS, YOU SHOULD CONSIDER VARIOUS FACTORS, INCLUDING THE RISKS DESCRIBED BELOW, AND, FROM TIME TO TIME, IN OTHER REPORTS THE COMPANY FILES WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). THESE FACTORS MAY CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENT. THE COMPANY DISCLAIMS ANY OBLIGATION TO PUBLICLY UPDATE THESE STATEMENTS, OR DISCLOSE ANY DIFFERENCE BETWEEN ITS ACTUAL RESULTS AND THOSE REFLECTED IN THESE STATEMENTS.

As used in this Annual Report, the terms "we," "us," "our," "Highlight," and the "Company" mean Highlight Networks, Inc. unless otherwise indicated. All dollar amounts in this Annual Report are expressed in U.S. dollars, unless otherwise indicated

**ITEM 1.   DESCRIPTION OF BUSINESS**

**The Company**

Highlight Networks, Inc.  was organized on June 21, 2007 and is a development stage, wireless broadband networking company in the business of planning, development and operation of both private and public access wireless broadband networks using WiFi (IEEE 802.11) and WiMAX (IEEE 802.16) wireless technologies to provide business and residential customers “last mile” connectivity for fast and reliable Internet communications.

 

In addition to basic Wireless Broadband Internet connectivity, we expect to offer additional services to enhance the Company’s offerings which may include low cost reliable customer packaged services including Voice over Internet Protocol (VoIP) usage and unlimited plans.  (see “Products”)

 

To date, no significant progress has been made to further our business plan; however, we have begun to develop network designs and to research the technologies to create them that may be appropriate to consider when sufficient funds are available. 

 

We are not a "blank check" company as that term is defined in Rule 419 of Regulation C of the Securities Act of 1933, as we have a specific business plan or purpose and does not include a plan to merge with or acquire a private company to be used as a vehicle for a reverse acquisition in the next 12 months.

 

**Plan of Operation**

 

We plan to expand through the various levels of development based upon the amount of cash that is received.  The initial phase of operations we expect to include selection of technology from a range of available equipment to serve both WiFi and WiMAX environments which will support as we expand fixed, portable and mobile service offerings.  The initial operational stage will be site selection based upon prospective markets to be served and existing competition in that market.

 

The next phase will include purchase, installation and testing of equipment for the initial network site coinciding with preliminary advertising and sales efforts in the area to be served.

 

The progress toward the accomplishment of this plan as well as the Company’s ability to accomplish it is dependent upon successful efforts by the Company to raise additional capital.   There is no assurance that additional necessary capital will be raised or that the Company will otherwise be able to complete its plan.

 

3

**Technology**

“WiFi” is deployed to enable consumers to obtain high-speed wireless Internet connections within a range of 150 to 250 feet from a wireless access point (AP).   Current WiFi technology uses equipment manufactured in accordance with the IEEE 802.11 family of standards, commonly known as “Wi-Fi,” short for wireless fidelity.   Basic data transfer rates range from speeds of up to 11 Mbps for 802.11b and up to 54 Mbps for 802.11a and 802.11g. New routers, marketed as “pre-802.11n,” employ MIMO (Multiple Input Multiple Output) technology, making them capable of providing speeds from 108 to 240 Mbps.

WiMAX.   ** ** As the inventive use of Wi-Fi has contributed to expanding broadband penetration and usage in the United States, WiMAX offers yet another emerging technological tool with the potential to deliver even greater gains in broadband accessibility in the future. WiMAX can deliver fixed wireless broadband access across much wider geographical areas than Wi-Fi; covering distances as great as five miles without line of sight and up to 30 miles under ideal conditions.  With potential data speeds up to 70 Mbps, WiMAX has been identified as a possible “last-mile” solution to deliver broadband into suburban, rural and remote areas. 

**Industry**

 

Fixed wireless technologies – *i.e.* , wireless systems or devices that are deployed in fixed locations as distinguished from mobile devices such as cell phones or personal digital assistants have also emerged as an important complement to the mobility afforded by CMRS, and as a potential “last-mile” solution to deliver broadband to currently unserved areas. According to the National Telecommunications and Information Administration and FCC figures, the number of fixed wireless broadband lines in the United States grew 132 percent between June 2005 and December 2006 – from 208,695 to 484,073.112.   TIA estimated the total number of fixed wireless subscribers in  2006 to be 800,000.

 

The Pew Internet and American Life Project found in its 2007 study that 47% of all adult Americans have a broadband connection at home.  In rural areas the number is 31% and continues to lag high speed adoption in urban centers and the suburbs although it continues to grow at 24% versus 18% for urban residents and just 7% for suburbanites.

 

As importantly,  the use of wireless services by the business sector continues to grow.   CTIA-The Wireless Association in its 2008 study including productivity gains and cost savings from the wireless industry said.  “Over the next 10 years, we can expect the productivity gains from the deployment and use of wireless broadband services to become much more important.  We estimate that productivity gains will generate  almost $860 billion in additional GDP over the next decade...”

 

**Competition**    

 

The market for broadband services is highly competitive and  includes companies that offer a variety of services using a  number of different technological platforms, such as cable  modems, DSL, third-generation cellular, satellite, wireless  internet service and other emerging technologies. We compete  with these companies on the basis of the speed, ease of use,  portability, reliability, and price of our respective services.   Our principal competitors include cable and DSL operators,  wireless telephone providers, WiFi and, prospectively, WiMAX  providers, satellite providers and others.

 

***Cable  Modem and DSL Services****   *

 

We compete with companies that provide Internet connectivity  through cable modems or DSL. Principal competitors include cable companies, such as Time Warner and Comcast, as well as incumbent  telephone companies, such as AT&T, Qwest and Verizon. Both  cable and telephone companies deploy their services over wired  networks initially designed for voice and one-way data  transmission that have subsequently been upgraded to provide for  additional services, such as Internet connectivity.

 

***Cellular  and PCS Services***

 

Cellular and PCS carriers are seeking to expand their capacity  to provide data and voice services that are superior to ours.  These providers have substantially broader geographic coverage  than we have and, for the foreseeable future, than we expect to  have. If one or more of these providers can deploy technologies  that compete effectively with our services, the mobility and  coverage offered by these carriers will provide even greater  competition than we currently face.
4

***Wireless Broadband Service Providers***

 

We also face competition from other wireless broadband service providers that use both licensed and unlicensed spectrum. Moreover, if our technology is successful and garners widespread support, we expect these and other competitors to adopt or modify our  technology or develop a technology similar to ours.

 

***Satellite***

 

Satellite providers like Hughes Network Services offer broadband data services that address a niche market,  mainly less densely populated areas that are unserved or  underserved by competing service providers. Although satellite offers service to a large geographic area, latency caused by the time it takes for the signal to travel to and from the satellite  may challenge the ability to provide some services, such as  VoIP, and reduces the size of the addressable market.

 

***WISPs  and WiFi***

 

We also compete with other wireless Internet service providers  that use unlicensed spectrum. In addition to these commercial  operators, many local governments, universities and other  governmental or quasi-governmental entities are providing or  subsidizing WiFi networks over unlicensed spectrum, in some  cases at no cost to the user.  

 

The Company believes that it will be able to compete in the limited markets which it expects to operate by providing  a quick, portable and inexpensive product with hands on customer service.

 

**Products**

 

 The Company expects its initial product offering to include the following product packages:

 

** Wireless Broadband:**

 

 Basic Wireless Broadband:  768Kbps down/256Kbps up   at $19.99 to 24.99 per month (by area)

 

 Premium Wireless Broadband:  1.5-2.0 Mbps down/256Kbps up  at $24.99 to $29.99 per month (by area)

 

 Business Wireless Broadband:   1.5-2.0 Mbps down/256Kbps up at $34.99.

 

**Voice Package**

 

 Voice over Internet Protocol (VoIP) service from $9.99 per month with usage plans to $21.99 with unlimited domestic long distance.  Business packages from $29.99 per month.

 

 In the early stages of development the Company will contract for VoIP services through an outside third party provider (s).

**Sales and Marketing:**

 

 Because of the limited areas serviced by the Company in the initial stages of development, the Company expects to focus its sales efforts on the areas to be services using the following:

 

·

Direct Mail

·

Local Publications

·

Sales Channel relationships such as apartment operators, builders and real estate agents

·

Internet Sales

·

Non exclusive sales agents

·

Affinity Marketing groups

 

These sales and marketing efforts will be undertaken in parallel with the installation and testing of the Company’s first wireless network and will be focused on the geographical area served by that network.
 

5

**ITEM 2.     PROPERTIES**

 

None

 **ITEM 3.     LEGAL PROCEEDINGS**

 

None

**ITEM 4.    [REMOVED AND RESERVED] **

** ** 

 

6

 

**PART II**

  **ITEM 5.    MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.**

 

All securities are equity securities and are classified as available-for-sale.

In 2010 the marketable securities were returned to Mr. West upon the rescission of the agreement to issue 7,329 shares to him.

On February 24, 2010 the Company issued 940 shares of common stock, of which 260 were previously purchased and listed as issued in November, 2008.  As of the previous year ended June 30, 2010, there were 1,500,940 shares of common stock outstanding. 

On April 22, 2011, Highlight Networks had a resolution and amended the Articles of Incorporation to include a 20/1 forward stock split, with all fractional shares being dropped with the effect being retroactive back to inception. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this reverse split.

On May 19, 2011, the majority shareholder retired 28,000,000 shares of common stock previously issued back to the Company.

For the current year ended June 30, 2011, the Company has issued an additional 20,040 shares of common stock. As of June 30, 2011 Highlight Networks, Inc. has 150,000,000 shares of common stock authorized at $0.001 par value per share and 2,419,600 shares of common stock issued and outstanding

**ITEM 6.   SELECTED FINANCIAL DATA**

The table below summarizes our audited balance sheet at June 30, 2011 compared to 2010 and statement of operations for the fiscal year ended June 30, 2011 compared to 2010.

 

 

** **

**At**

**June 30,**

** **

 

** **

**2011**

**(Audited)**

** **

** **

**2010**

**(Audited)**

** **

***Balance Sheet:***

 

 

 

 

 

 

Cash

 

$

66,569

 

 

$

982

 

Total Assets

 

$

66,569

 

 

$

982

 

Total Liabilities

 

$

12,536

 

 

$

6,443

 

Total Stockholders’ Equity (Deficit)

 

$

54,033

 

 

$

(5,461)

 

 

** **

**For the Fiscal Year Ended**

**June 30,**

** **

 

** **

**2011**

**(Audited)**

** **

** **

**2010**

**(Audited)**

** **

***Statement of Operations*** :

 

 

 

 

 

 

Revenue

 

$

-0-

 

 

$

-0-

 

Net Loss

 

$

(43,460)

 

 

$

(13,059)

 

Net Loss Per Share of Common Stock

 

$

(0.00)

 

 

$

(0.00)

 

** **

7

**ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.**

*The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein. In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed in this Form 10-K.*

**Overview**

As of the date of this report, the Company has had limited ongoing operations consisting of product and technology review, analysis and system design and negotiations for system placement and third party contract services,

**Results of Operations for year ended June 30, 2011**

Revenues for the year ended June 30, 2010 and for the year ended June 30, 2011 were $-0- respectively for both periods.

General and administrative, accounting, legal, and valuation impairment expenses increased by $30,401, from $13,059 in the year ended June 30, 2010 to $43,460 in the year ended June 30, 2011.

On August 22, 2011 we enacted a split of the common stock in the amount of 20:1. The stock split was effective April 22, 2011 for holders of record as of that date. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this reverse split. All per share disclosures retroactively reflect shares outstanding or issuable as though the reverse split had occurred from inception.

Loss per share was $0.00 and $0.00 for the years ended June 30, 2011 and June 30, 2010 respectively.  The weighted average shares decreased from 30,039,760 as of June 30, 2010 to 26,640,616 as of June 30, 2011.

As of June 30, 2011, the Company had no agreements with sub-distributors relating to distribution commitments or guarantees that had not been recognized in the statement of operations.

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated material revenues and sufficient revenues may not be forthcoming. Accordingly, we must raise cash from sources other than operations.
**Liquidity and Capital Resources**

The Company  filed a registration statement with the Securities and Exchange Commission which became effective on October 6, 2008 for a self underwritten offering in the amount of $510,000 consisting of 100,000 shares of common stock at a share price of  $5.10.  The Company has had limited participation in the offering.  The Company is attempting to secure private funding to complete its first network installation however, there is not commitment for these funds and there is no assurance that the amount will be raised or that the Company will otherwise secure sufficient funds to achieve its business plan.

 

To date, the Company’s previous principal officer and the Company’s major shareholder have provided services and loans to the company in order to continue operations.  

In 2008 and 2009, Mr. West, the Company's former principal stockholder advanced $24,180 to the Company and Mr. West also provided services, valued at $2,000 per month and office space valued at $200 per month. The total value of $13,200 was reflected as an operating expense in 2009. As of June 30, 2011, the Company owes $0 related to these advances.

In 2010 and 2011, Infanto Holdings LLC, whose principal stockholder Joseph C. Passalaqua is also a principal stockholder of Highlight Networks, Inc., loaned the Company $10,564.  These notes are accruing 18% simple interest. As of June 30, 2011, the Company owes $10,564 in principal and $1,722 in interest related to this note.

8

**Commitments and Capital Expenditures**

The Company had no material commitments for capital expenditures.  
 

**Critical Accounting Policies Involving Management Estimates and Assumptions**

Our discussion and analysis of our financial condition and results of operations is based on our financial statements. In preparing our financial statements in conformity with accounting principles generally accepted in the United States of America, we must make a variety of estimates that affect the reported amounts and related disclosures.

**Stock Based Compensation** . We will account for employee stock-based compensation costs in accordance with ASC 718, *Share-Based Payments*  , which requires all share-based payments to employees, including grants of employee stock options, to be recognized in our statements of operations based on their fair values. We will utilize the Black-Scholes option pricing model to estimate the fair value of employee stock based compensation at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our stock-based compensation.

**Use of Estimates** . The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

**Deferred Tax Valuation Allowance***.* Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the total of tax payable for the period and the change during the period in deferred tax assets and liabilities.

**Accounting For Obligations And Instruments Potentially To Be Settled In The Company s Own Stock** : We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815, *Accounting for Derivative Financial Instruments*. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock 

**Off-Balance Sheet Arrangements**

Highlight Networks, Inc. does not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet financial arrangements. 

C**ommon Stock**

The Company is authorized to issue 150,000,000 shares of common stock, with par value of $0.001 per share. As of June 30, 2011, a total of 2,419,600 shares of common stock were issued and outstanding. Holders of common stock are entitled to receive dividends, when and if declared by the board of directors, subject to prior rights of holders of any preferred stock then outstanding and to share ratably in the net assets of the company upon liquidation. Holders of common stock do not have preemptive or other rights to subscribe for additional shares. The articles of incorporation do not provide for cumulative voting. Shares of common stock have equal voting, dividend, liquidation and other rights, and have no preference, exchange or appraisal rights.

On June 21, 2007, the Company issued 500,000 shares of common stock, which are restricted as to transferability, to its founders and directors for $500 offset against current notes payable.  On July 16, 2007, the Company issued 250,000 shares of common stock in exchange for $5,000 cash.  In November, 2007, the Company split the common stock two for one, leaving 1,500,000 issued and outstanding.

  

9

In November, 2008, the Company had purchase agreements for 260 shares of common stock in exchange for $1,329 cash. In March, 2009, the Company issued 7,329 shares of common stock, which are restricted as to transferability, to its one of its founders and directors for $37,380 offset against current notes payable.

 In 2008-2009, Mr. West also provided services, valued at $2,000 per month and office space valued at $200 per month. The total value of $13,200 was reflected as an operating expense in 2009.  The Company accounted for this as a capital transaction and was obligated to issue 7,329 shares.  In 2009 the Company had determined a decline in fair value below the cost basis is other than temporary. Therefore the cost basis of the individual security was written down to fair value. The impairment of $2,000 was recorded in 2009. In 2010, the common stock agreement was rescinded. The common shares were cancelled. Under the terms of the agreement Mr. West accepted the marketable securities valued at $4,010 and forgave approximately $3,255 in amounts due him in exchange for returning the 7,329 shares of common stock. 

On February 24, 2010 the Company issued 940 shares of common stock, of which 260 were previously purchased and listed as issued in November, 2008.  

On April 22, 2011, Highlight Networks had a resolution and amended the Articles of Incorporation to include a 20/1 forward stock split, with all fractional shares being dropped with the effect being retroactive back to inception. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this reverse split.

On May 19, 2011, the majority shareholder retired 28,000,000 shares of common stock previously issued back to the Company.

For the current year ended June 30, 2011, the Company has issued an additional 20,040 shares of common stock. As of June 30, 2011 Highlight Networks, Inc. has 150,000,000 shares of common stock authorized at $0.001 par value per share and 2,419,600 shares of common stock issued and outstanding

  

**ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.**

The response to this Item is submitted as a separate section of this report commencing on page 16 of this Form 10-K. The accompanying consolidated financial statements and notes to financial statements have been prepared assuming that the Company will continue as a going concern and, therefore, has the ability to manage the recovery of its assets and satisfy its liabilities in the normal course of its continued operation.

**ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.**

None

**ITEM 9A.**     **CONTROLS AND PROCEDURES****EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES**

**CONTROLS AND PROCEDURES**

 

The Company's Chief Executive Officer is responsible for establishing and maintaining disclosure controls and procedures for the Company.

**EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES**

For purposes of this Item 9A, the term disclosure controls and procedures means controls and other procedures of the Company (i) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (15 U.S.C. 78a *et seq.* and hereinafter the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “Commission”), and (ii)  include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures do not yet comply with the requirements in (i) and (ii) above.  

Our Chief Executive Officer and Chief Financial Officer have reviewed the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) as of the end of the period covered by this report and have concluded that (i) the Company’s disclosure controls and procedures are not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Commission, and (ii) the Company’s controls and procedures have not been designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

10

  

**CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING**

There was no change in our internal control over financial reporting identified in connection with our evaluation that occurred during our last quarter (our fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

**REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, our internal control over financial reporting does not provide assurance that a misstatement of our financial statements would be prevented or detected.

Subsequent to filing on August 25, 2011 our Annual Report on Form 10-K for the year ended June 30, 2011 with the Commission, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management has concluded that the Company’s internal controls over financial reporting are not effective because as noted in the Annual Report, we have limited resources available. As we obtain additional funding and employ additional personnel, we will implement programs recommended by the Treadway Commission to ensure the proper segregation of duties and reporting channels.

Our independent public accountant, Michael F. Cronin, has not conducted an audit of our controls and procedures regarding internal control over financial reporting. Consequently, Michael F. Cronin expresses no opinion with regards to the effectiveness or implementation of our controls and procedures with regards to internal control over financial reporting.

**INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS**

 

The Company's management does not expect that its disclosure controls or its 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. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or 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 management override of the 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.

  
  

11

**PART III**

 

 **ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.**

In the previous year ended June 30, 2010, In connection with the change of control and pursuant to the Purchase Agreement, Perry D. West resigned as the Company’s President, Chief Executive Officer, and Director of the Company effective immediately. Anthony E. Lombardo was appointed as Director, President and Chief Executive Officer, and Damion D. Glushko was appointed as Director and Secretary effective immediately.

**Departure of Directors or Certain Officer: Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.**

**(a)   Resignation of Director and Officer**

On June 3, 2010, Perry D. West resigned as the Company’s President, Chief Executive Officer, and sole Director effective immediately. The resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

** **

**(b)   Appointment of Directors and Officers**

On June 3, 2010, the following persons were appointed as our officers and directors in connection with the change of control:

The directors and executive officers of the Company for the reported period are as follows:

 

Name

 

Age

 

Position

 

 

Anthony E. Lombardo

 

          50

         President and, Chief Executive Officer

 

 

 

Damion D. Glushko

 

          43

         Secretary; Director; Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

**Anthony E. Lombardo, Director, President, and CEO**

From March 1998 to December 2002, Mr. Lombardo worked as a Program Manager for Hughes Aircraft in Arlington, Texas. He was the South Central Regional Manager for Training and Services with General Motors Corporation in Dallas, TX from January 2003 through March 2004. From April 2004 to July 2008 he was Operations Manager of Laqua’s 481 Chevrolet, an auto dealership in Fulton, NY. Mr. Lombardo was a consultant for Hendricks Motorsports in North Carolina from August 2008 through January 2010.

**Damion D. Glushko, Director, Secretary, and CFO**

Mr. Glushko earned his real estate license in Florida in October 1999. He joined Prudential Real Estate from 2000 through 2002 where he earned the President’s Award in 2001. Mr. Glushko was with Century 21 Real Estate from 2002 through 2008 where he was in the Million Dollar Club for four consecutive years. In 2009, he became Property Manager for Sales and Rentals at Colony Park Mobile Home Village in Merritt Island, Florida.

**Executive Compensation**

        

We have made no provisions for cash compensation to our officers or directors.

**Employment Agreements**

We have not entered into an employment agreement with our employees, and employment arrangements are all subject to the discretion of our board of directors.

**Indemnification of Officers and Directors**

Our articles of incorporation and bylaws indemnify our directors and officers to the fullest extent permitted by Nevada corporation law. Insofar as indemnification for liability arising under the Securities Act may be permitted to directors, officers, and controlling persons, we are aware that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act of 1933 and is unenforceable. Set forth below is information regarding the business experience of the current Directors and executive officers of the Company.

12

**ITEM 11.    EXECUTIVE COMPENSATION.**

The following table sets forth, for the fiscal years indicated, all compensation awarded to, earned by or paid to the chief executive officer of the Company, the only compensated executive officer as of June 30, 2011. Other significant employees would not be required to be included in the table due to the fact that such employees were not executive officers of the Company at the end of the most recently completed fiscal year:

**Summary Compensation Table**

 

 

 

 

 

**Annual Compensation**

** **

**Payouts**

** **

 

**Name and Principal Position**

** **

**Fiscal Year**

** **

**Salary**

** **

**Bonus**

** **

**Other**

**Annual Compensation**

** **

**Underlying Options**

** **

**All Other**

**Compensation**

Anthony E. Lombardo

 

 

 

 

 

 

 

 

 

 

 

 

President/Director/CEO

 

2011

 

-0-

 

--

 

--

 

--

 

--

Damion D. Glushko

 

 

 

 

 

 

 

 

 

 

 

 

Secretary/Director/CFO

 

2011

 

-0-

 

--

 

--

 

--

 

--

**Options/Stock Appreciation Rights**

There were no stock options and stock appreciation rights ("SARs") granted to executive officers during the fiscal year ended June 30, 2011 or for the previous year ended June 30, 2010.

**Director Compensation**

The Company does not have any standard arrangements pursuant to which directors of the Company are compensated for services provided as a director. All directors are entitled to reimbursement for expenses reasonably incurred in attending Board of Directors' meetings. There have been no distributions of Stock to the Board Members as of the end of June 30, 2011 and the same period ending June 30, 2010.

**Compensation Agreements, Termination of Employment and Change-in-Control Arrangements**

None. 
** **

**ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.**

 

On June 3, 2010, Highlight Networks, Inc.’s (the “Company”) majority shareholders entered into a stock purchase agreement (the “Purchase Agreement”) with Infanto Holdings, Corp. (“Infanto”), pursuant to which, Infanto purchased: 500,000 shares of the Company’s issued and outstanding common stock from Perry D. West, the President and CEO of the Company; 500,000 shares of the Company’s issued and outstanding common stock from Taylor B. West, a shareholder of the Company; and 500,000 shares of the Company’s issued and outstanding common stock from Hee Joon Park, a shareholder of the Company. The total of 1,500,000 shares represented 99.9% of the Company’s outstanding common stock as of that date. Infanto paid a total of $50,000 to selling shareholders.

In connection with the change of control and pursuant to the Purchase Agreement, Perry D. West resigned as the Company’s President, Chief Executive Officer, and Director of the Company effective immediately. Anthony E. Lombardo was appointed as Director, President and Chief Executive Officer, and Damion D. Glushko was appointed as Director and Secretary effective immediately. 

The following two tables presents certain information regarding beneficial ownership of our common stock for the years ended June 30, 2010 and June 30, 2011 by each person known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock, each of our directors, each named executive officer and all directors and executive officers as a group. Unless otherwise indicated, each person in the table has sole voting and investment power as to the shares shown.

13

The following table presents certain information regarding beneficial ownership of our common stock as of June 30, 2010:

 

 

**Percent of**

 
****Shares**

Beneficially

 

**Total Shares**

**Name of Beneficial Owner**

**Owned**

 

**Outstanding**

Infanto Holdings, Corp

 

1,500,000

 

 

99.9%

 

 

 

 

 

 

Anthony E. Lombardo

 

0

 

 

0%

 President; Director; CEO

 

 

 

 

 

 

 

 

 

 

 

Damion D. Glushko

 

0

 

 

0%

Secretary; Director; CFO                                                                                                                              

 

 

 

 

 

Officers and Directors as a Group

 

0

 

 

0%

 

 

 

 

 

 

*1,500,940 shares of outstanding common stock as of June 30, 2010

 

 

 

 

 

The address of the Company is 215 S. Riverside Drive, Suite 12, Cocoa, Florida  32922.

The following table presents certain information regarding beneficial ownership of our common stock as of June 30, 2011:

 

 

**Percent of**

 
****Shares**

Beneficially

 

**Total Shares**

**Name of Beneficial Owner**

**Owned**

 

**Outstanding**

Infanto Holdings, Corp

 

2,000,000

 

 

82%

 

 

 

 

 

 

Anthony E. Lombardo

 

36,000

 

 

1%

 President; Director; CEO

 

 

 

 

 

 

 

 

 

 

 

Damion D. Glushko

 

36,000

 

 

1%

Secretary; Director; CFO                                                                                                                              

 

 

 

 

 

Officers and Directors as a Group

 

72,000

 

 

2%

 

 

 

 

 

 

*2,419,600 shares of outstanding common stock as of June 30, 2011

 

 

 

 

 

The address of the Company is 215 S. Riverside Drive,  Suite 12, Cocoa, Florida  32922.

 
**ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**

 

In 2007, the Company issued 500,000 shares of restricted common stock to Perry West for $250 and 500,000 shares of restricted common stock to Taylor West $250.   On July 16, 2007 Hee Joon Park purchased 500,000 shares of common stock for $5,000.  The shares were issued pursuant to Section 4(2) of the Securities Act of 1933.  Perry West provided the Company, without cost, his services, valued at $2,000 per month, which totaled $10,000 for the five months ended December 31, 2007. He also provided us, without cost, office space valued at $200 per month, which totaled $1,000 for the five months ended December 31, 2007. The total of these expenses, $11,000 from inception for the five months ended December 31, 2007 was reflected in the statement of operations as general and administrative expenses with a corresponding contribution of additional paid-in capital.

On June 3, 2010, Highlight Networks, Inc.’s (the “Company”) majority shareholders entered into a stock purchase agreement (the “Purchase Agreement”) with Infanto Holdings, Corp. (“Infanto”), pursuant to which, Infanto purchased: 500,000 shares of the Company’s issued and outstanding common stock from Perry D. West, the President and CEO of the Company; 500,000 shares of the Company’s issued and outstanding common stock from Taylor B. West, a shareholder of the Company; and 500,000 shares of the Company’s issued and outstanding common stock from Hee Joon Park, a shareholder of the Company. The total of 1,500,000 shares represents 99.9% of the Company’s outstanding common stock as of June 30, 2010. Infanto paid a total of $50,000 to selling shareholders.

14

In connection with the change of control and pursuant to the Purchase Agreement, Perry D. West resigned as the Company’s President, Chief Executive Officer, and Director of the Company effective immediately. Anthony E. Lombardo was appointed as Director, President and Chief Executive Officer, and Damion D. Glushko was appointed as Director and Secretary effective immediately.

None of the following parties has, since commencement of our fiscal years ended June 30, 2010 and June 30,2011, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, in which our company is a participant and the amount involved exceeds the lesser of $120,000 or 1% of the average of our company’s total assets for the last three completed financial years:

 

 

(i)

Any of our directors or officers;

 

 

 

 

(ii)

Any person proposed as a nominee for election as a director;

 

 

 

 

(iii)

Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;

 

 

 

 

(iv)

Any of our promoters; and

 

 

 

 

(v)

Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.

 

**Director Independence**

 

Under NASDAQ rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. Our directors, Anthony E. Lombardo and Damion D. Glushko, are also officers of the Company.  As a result, we do not have any independent directors.

 

As a result of our limited operating history and limited resources, our management believes that we will have difficulty in attracting independent directors. In addition, we would be likely be required to obtain directors and officers insurance coverage in order to attract and retain independent directors.  Our management believes that the costs associated with maintaining such insurance is prohibitive at this time.

 

**ITEM 14.    PRINCIPAL ACCOUNTANT FEEES AND SERVICES**

**(1)    **Audit Fees:  The Company’s principal accountant, Michael Cronin, CPA has billed for Audit services $5,450 for the year ended June 30, 2011 and $5,450 for the year ended June 30, 2010.

**(2)    **Audit Related Fees:            None

**(3)    **Tax Fees:                            None

**(4)    **All Other Fees:                   None

 
15

**PART  IV**

  

**ITEM 15.     EXHIBITS**

 

EXHIBIT 31.1

HIGHLIGHT  NETWORKS, INC. PRINCIPAL EXECUTIVE OFFICER'S CERTIFICATE PURSUANT TO SECTION 302

EXHIBIT 31.2

HIGHLIGHT  NETWORKS, INC. PRINCIPAL FINANCIAL OFFICER'S CERTIFICATE PURSUANT TO SECTION 302

EXHIBIT 32.1

HIGHLIGHT  NETWORKS, INC. PRINCIPAL EXECUTIVE OFFICER’S CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,   AS ADOPTED PURSUANT TO SECTION 906 OFTHE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.2

HIGHLIGHT  NETWORKS, INC. PRINCIPAL FINANCIAL OFFICER'S CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,   AS ADOPTED PURSUANT TO SECTION 906 OFTHE SARBANES-OXLEY ACT OF 2002

 

 

 

16

Highlight Networks, Inc.

(A Development Stage Company)

-:-

June 30, 2011

Report of Independent Registered Public Accountant                                                18

Balance Sheets

June 30, 2011 and June 30, 2010                                                                               19

Statements of Operations 

For the year ended June 30, 2011 and 

For the year ended June 30, 2010 and 

For the cumulative period from June 21, 2007 (inception) to June 30, 2011                  20

  

Statement of Stockholders' Equity

Since June 21, 2007 (inception) to June 30, 2011                                                        21-22

Statements of Cash Flows

For the year ended June 30, 2011 and 

For the year ended June 30, 2010 and 

For the cumulative period from June 21, 2007 (inception) to June 30, 2011                 23-24

Notes to Financial Statements                                                                                 25

17
**INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS’ REPORT

 **
**Michael F. CroninCertified Public AccountantOrlando, FL 32708**

Board of Directors and ShareholdersHighlight Networks, Inc. Cocoa, Florida

I have audited the accompanying balance sheet of Highlight Networks, Inc. (a development stage company) as of June 30, 2011 and 2010 and the related statements of operations, stockholders' equity and cash flows for the years then ended and the period of June 21, 2007 (inception) to June 30, 2011. The financial statements are the responsibility of the directors. My responsibility is to express an opinion on these financial statements based on my audits.

I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board *(United States)*. Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor was I engaged to perform, an audit of its internal control over financial reporting. My 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, I express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Highlight Networks, Inc. as of June 30, 2011 and 2010 and the results of its operations, its cash flows and changes in stockholders' equity from inception and for the periods then ended in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred a $101,853 cumulative loss from operations and consumed $20,377 of cash due to its current operating activities.  The Company may not have adequate readily available resources to fund operations through June 30, 2012. This raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty

August 24, 2011

/s/ Michael F. Cronin

 

Michael F. Cronin

Certified Public Accountant

NY, FL

Orlando, Florida

 

 

 

 

18

**HIGHLIGHT NETWORKS, INC.**

**(A Development Stage Company)**

**BALANCE SHEETS**

 

 

 

 

 

 

 

** June 30,**

 

** June 30,**

 

 

**2011**

 

**2010**

ASSETS

 

 

 

 

  Current Assets:

 

 

 

 

    Cash

 

 $           66,569 

 

 $                982 

 

 

 

 

 

  Total Current Assets

 

              66,569 

 

                   982 

 

 

 

 

 

TOTAL ASSETS

 

 $           66,569 

 

 $                982 

 

 

 

 

 

LIABILITIES & EQUITY

 

 

 

 

  Current Liabilities:

 

 

 

 

    Accounts Payable

 

 $                250 

 

 $             1,431 

    Related Party Note Payable

 

              10,564 

 

                5,000 

    Interest Payable

 

                1,722 

 

                     12 

 

 

 

 

 

  Total Current Liabilities

 

              12,536 

 

                6,443 

 

 

 

 

 

  Total Liabilities

 

              12,536 

 

                6,443 

 

 

 

 

 

  Stockholders' Equity

 

 

 

 

    Common Stock- $.001 par value; 150,000,000 shares

 

 

 

 

    authorized; 30,018,800 and 2,419,600 shares outstanding

 

 

 

 

    as of June 30, 2010 and June 30, 2011

 

              20,776 

 

                1,501 

    Additional Paid-In Capital

 

            135,110 

 

              51,431 

    Deficit Accumulated During the Development Stage

 

           (101,853)

 

             (58,393)

 

 

 

 

 

  Total Stockholders' Equity

 

              54,033 

 

               (5,461)

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

 $           66,569 

 

 $                982 

 

 

 

 

 

See Summary of Significant Accounting Polices and Notes to Audited Financial Statements

19

**HIGHLIGHT NETWORKS, INC.**

**(A Development Stage Company)**

**STATEMENTS OF OPERATIONS**

 

 

 

 

**Inception**

 

 

**For the Years Ended**

 

**(June 21, 2007)**

 

 

**June 30,**

 

**to**

 

 

**2011**

 

**2010**

 

**June 30, 2011**

**Revenues:**

 

                                 - 

 

                                 - 

 

                                 - 

 

 

 

 

 

 

 

**Expenses:**

 

 

 

 

 

 

Accounting Fees

 

                       12,800 

 

                         3,345 

 

                       17,645 

General and Administrative

 

                       28,900 

 

                         4,702 

 

                       38,036 

Legal Fees

 

                              50 

 

                         5,000 

 

                       39,050 

Rent

 

                                 - 

 

                                 - 

 

                         3,400 

Valuation Impairment on Marketable Securities

 

                                 - 

 

                                 - 

 

                         2,000 

Total Expenses

 

                       41,750 

 

                       13,047 

 

                     100,131 

 

 

 

 

 

 

 

Operating Income (Loss)

 

                      (41,750)

 

                      (13,047)

 

                    (100,131)

 

 

 

 

 

 

 

Other (Income) Expense

 

 

 

 

 

 

Interest, Net

 

                        (1,710)

 

                             (12)

 

                        (1,722)

Total Other Income (Expense)

 

                        (1,710)

 

                             (12)

 

                        (1,722)

 

 

 

 

 

 

 

Net Loss Before Taxes

 

                      (43,460)

 

                      (13,059)

 

                    (101,853)

 

 

 

 

 

 

 

Income and Franchise Tax

 

                                 - 

 

                                 - 

 

                                 - 

 

 

 

 

 

 

 

Net Income (Loss)

 

 $                   (43,460)

 

 $                   (13,059)

 

 $                 (101,853)

 

 

 

 

 

 

 

Basic & Diluted Loss per Share

 

 $                       (0.00)

 

 $                       (0.00)

 

 

 

 

 

 

 

 

 

Weighted Average Shares

 

 

 

 

 

 

Outstanding

 

26,640,616

 

30,039,760

 

 

 

 

 

 

 

 

 

See Summary of Significant Accounting Polices and Notes to Audited Financial Statements

 

20

 

**HIGHLIGHT NETWORKS, INC.**

**(A Development Stage Company)**

**STATEMENT OF STOCKHOLDERS' DEFICIENCY**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**Deficit**

 

 

 

 

 

 

 

 

 

 

**Accumulated**

 

 

 

 

 

 

 

 

** Additional**

 

**Since**

 

**Total**

 

 

** Common Stock**

 

** Paid in**

 

** Development**

 

**Stockholders'**

 

 

** Shares**

 

** Par Value**

 

** Capital**

 

**Stage**

 

**Deficiency**

Inception June 21, 2007 - restated to reflect

 

 

 

 

 

 

 

 

 

 

2:1 stock split effective November 2008

 

                        - 

 

                - 

 

                 - 

 

                           - 

 

                      - 

 

 

 

 

 

 

 

 

 

 

 

Stock Issued for Cash

 

         1,000,000 

 

        1,000 

 

           (500)

 

                           - 

 

                 500 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

                        - 

 

                - 

 

                 - 

 

                 (1,580)

 

            (1,580)

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2007

 

         1,000,000 

 

        1,000 

 

           (500)

 

                 (1,580)

 

                 500 

 

 

 

 

 

 

 

 

 

 

 

Stock Issued for Cash

 

            500,000 

 

           500 

 

          4,500 

 

                           - 

 

              4,500 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

                        - 

 

                - 

 

                 - 

 

               (23,100)

 

          (23,100)

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2008

 

         1,500,000 

 

        1,500 

 

          4,000 

 

               (24,680)

 

          (19,180)

 

 

 

 

 

 

 

 

 

 

 

Stock Agreement as Payment for Related Party Payable

                7,329 

 

               7 

 

        37,373 

 

                           - 

 

            37,380 

 

 

 

 

 

 

 

 

 

 

 

Contributed Captial 

 

                        - 

 

                - 

 

          6,010 

 

                           - 

 

              6,010 

 

 

 

 

 

 

 

 

 

 

 

Stock Issued for Cash

 

                   260 

 

                - 

 

          1,329 

 

                           - 

 

              1,329 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

                        - 

 

                - 

 

                 - 

 

               (20,654)

 

          (20,654)

 

 

 

 

 

 

 

 

 

 

 

21

Balance at June 30, 2009

 

         1,507,589 

 

        1,508 

 

        48,711 

 

               (45,334)

 

              4,885 

 

 

 

 

 

 

 

 

 

 

 

Stock Agreement Cancelled - Adjustment to Stock and Contributed Capital

               (7,329)

 

             (7)

 

        (4,003)

 

                           - 

 

            (4,010)

 

 

 

 

 

 

 

 

 

 

 

Stock Issued for Cash

 

                   680 

 

                - 

 

          3,468 

 

                           - 

 

              3,468 

 

 

 

 

 

 

 

 

 

 

 

Contributed Capital 

 

                        - 

 

                - 

 

          3,255 

 

                           - 

 

              3,255 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

                        - 

 

                - 

 

                 - 

 

               (13,059)

 

          (13,059)

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2010

 

         1,500,940 

 

        1,501 

 

        51,431 

 

               (58,393)

 

            (5,461)

 

 

 

 

 

 

 

 

 

 

 

Stock Issued for Cash

 

              16,440 

 

             16 

 

        83,828 

 

                           - 

 

            83,844 

 

 

 

 

 

 

 

 

 

 

 

Stock Issued for Services

 

                3,600 

 

      18,360 

 

                 - 

 

                           - 

 

            18,360 

 

 

 

 

 

 

 

 

 

 

 

Contributed Captial 

 

                        - 

 

                - 

 

             750 

 

                           - 

 

                 750 

 

 

 

 

 

 

 

 

 

 

 

Forward Stock Split 20-1

 

       28,898,620 

 

      28,899 

 

      (28,899)

 

                           - 

 

                      - 

 

 

 

 

 

 

 

 

 

 

 

Stock Retired to Treasury

 

      (28,000,000)

 

    (28,000)

 

        28,000 

 

 

 

                      - 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

 

 

 

 

 

               (43,460)

 

          (43,460)

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2011

 

         2,419,600 

 

 $   20,776 

 

 $   135,110 

 

 $          (101,853)

 

 $         54,033 

 

 

 

 

 

 

 

 

 

 

 

See Summary of Significant Accounting Polices and Notes to Audited Financial Statements

22

**HIGHLIGHT NETWORKS, INC.**

**(A Development Stage Company)**

**STATEMENT OF CASH FLOWS**

 

 

 

 

 

 

 

 

 

 

**Inception**

 

 

**For the Years Ended**

 

**(June 21, 2007)**

 

 

**June 30,**

 

**to**

 

 

**2011**

 

**2010**

 

**June 30, 2011**

CASH FLOWS FROM OPERATING

 

 

 

 

 

 

ACTIVITIES:

 

 

 

 

 

 

Net Loss

 

 $            (43,460)

 

 $          (13,059)

 

 $                (101,853)

Adjustments required to reconcile net loss

 

 

 

 

 

 

to cash used in operating expenses:

 

 

 

 

 

 

Non cash expenses and impairment charges

 

                          - 

 

                         - 

 

                         2,000 

Fair value of services provided by related parties

 

                 18,360 

 

                         - 

 

                       55,760 

Expenses paid by related parties

 

                   4,194 

 

                 5,345 

 

                       11,273 

Increase (decrease) in accounts payable and accrued services

 

                      529 

 

                 1,443 

 

                         1,972 

Cash Used in Operating Activities

 

               (20,377)

 

               (6,271)

 

                     (30,848)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING

 

 

 

 

 

 

ACTIVITIES:

 

 

 

 

 

 

Proceeds from related party debt borrowings

 

                   2,120 

 

                 2,910 

 

                         3,776 

Proceeds from the issuance of common stock

 

                 83,844 

 

                 3,468 

 

                       93,641 

Cash Generated by Financing Activities

 

                 85,964 

 

                 6,378 

 

                       97,417 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23

Change in Cash

 

                 65,587 

 

                    107 

 

                       66,569 

Cash at Beginning of Period

 

                      982 

 

                    875 

 

                                 - 

Cash at End of Period

 

 $              66,569 

 

 $                 982 

 

 $                    66,569 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Summary of Significant Accounting Polices and Notes to Audited Financial Statements

 

 

 

 

 

 

 

 

24

HIGHLIGHT NETWORKS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of accounting policies for Highlight Networks, Inc. (a development stage company) is presented to assist in understanding the Company's financial statements.  The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

Nature of Operations and Going Concern

The accompanying financial statements have been prepared on the basis of accounting principles applicable to a “going concern”, which assume that Highlight Networks, Inc. (hereto referred to as the “Company”) will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations.

Several conditions and events cast doubt about the Company’s ability to continue as a “going concern.”  The Company has incurred net losses of approximately $101,000 for the period from June 21, 2007 (inception) to June 30, 2011, has an accumulated deficit, has recurring losses, has minimal revenues and requires additional financing in order to finance its business activities on an ongoing basis.  The Company’s future capital requirements will depend on numerous factors including, but not limited to, continued progress in the pursuit of business opportunities. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained.  In the interim, shareholders of the Company have committed to meeting its minimal operating expenses.  Management believes that actions presently being taken to revise the Company’s operating and financial requirements provide them with the opportunity to continue as a “going concern”

These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a “going concern”.  While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the “going concern” assumption used in preparing these financial statements, there can be no assurance that these actions will be successful.  If the Company were unable to continue as a “going concern,” then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported revenues and expenses, and the balance sheet classifications used. 

Organization and Basis of Presentation

Highlight Networks, Inc., (the "Company") was formed on June 21, 2007 as a Nevada corporation.  Since June 21, 1997, the Company is in the development stage, and has not commenced planned principal operations.  The Company has a June 30 year end.

Nature of Business

The Company is a development stage, wireless broadband networking company in the business of planning, development and operation of both private and public access wireless broadband networking using WiFi (IEEE 802.11) and WiMAX (IEEE 802.16) wireless technologies to provide business and residential customers “last mile” connectivity. The Company's activities to date have consisted primarily of organizational and equity fund-raising activities. The Company has not yet commenced its principal revenue producing activities.

The Company’s principal executive offices are located at 215 South Riverside Dr. Suite 12 Cocoa, FL. Our telephone number is (321) 684-5721. 

Cash and Cash Equivalents

 For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. 

 

25

Valuation of Long-lived Assets

 

The Company reviews the recoverability of its long-lived assets, including buildings, equipment and intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company's ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

 

The Company amortizes the costs of other intangibles (excluding goodwill) over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested for impairment, at least annually, and written down to fair value as required. At June 30, 2011, the Company has no impaired carrying value of its intangible assets.

 

Fair Value Accounting

 

On July 1, 2008, we adopted Accounting Standards Codification ASC 820, “Fair Value Measurements.”, which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements.  ASC 820 does not require any new fair value measurements, and has been partially deferred for non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until our fiscal year beginning July 1, 2009, and interim periods within those fiscal years. The partial adoption of ASC 820 for financial assets and liabilities did not have a material impact on our consolidated financial position, results of operations or cash flows.

Fair Value Accounting (Continued)

In addition, on July 1, 2008, we adopted Statement of FASB ASC 825, “*Financial Instruments*,” . Under FASB ASC 825, companies may elect to measure certain financial instruments and certain other items at fair value.  The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings.  We did not elect to use the fair value option.  Therefore, the adoption of FASB ASC 825 did not impact our consolidated financial position, results of operations or cash flows.

Revenue and Expense Recognition

Revenue is recognized when earned rather than when received. Sales are recognized when a product is delivered or shipped to the customer and all material conditions relating to the sale have been substantially performed. Expenses are charged to operations as incurred.

The Company recognizes revenues in accordance with the Securities and Exchange Commission Staff Accounting Bulletin (SAB) number 104, "Revenue Recognition."  SAB 104 clarifies application of U. S. generally accepted accounting principles to revenue transactions.   Under certain circumstances, the Company recognizes revenue in accordance with the provisions of Statement of Financial Accounting Standards No. 139 and American Institute of Certified Public Accountants Statement of Position 00-2 (collectively referred to as "SOP 00-2"). The Company recognizes revenue when the earnings process is complete.  That is, when the arrangements of the goods are documented, the pricing becomes final and collectibility is reasonably assured. An allowance for bad debt is provided based on estimated losses. For revenue received in advance for goods, the Company records a current liability classified as either deferred revenue or customer deposits. As of the years ended June 30, 2011 and 2010, there was no deferred revenue. 

Concentration of Credit Risk

The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.  The Company had cash and cash equivalents of $66,569 and $982 as of June 30, 2011 and 2010 all of which was fully covered by federal depository insurance.

 

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Pervasiveness of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles required 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 revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Stock-based Compensation

Stock-based awards to employees and non-employees are accounted for using the fair value method in accordance with ASC 718, *Share-Based Payments*.  .

 

We adopted the provisions of ASC 718, *Share-Based Payments*. , which requires that companies measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements.. We calculate the fair value of options using a Black-Scholes option pricing model. We do not currently have any outstanding options subject to future vesting.

 

ASC 718 also requires the benefits of tax deductions in excess of recognized compensation expense to be reported in the Statement of Cash Flows as a financing cash inflow rather than an operating cash inflow. In addition, ASC 718 required a modification to the Company’s calculation of the dilutive effect of stock option awards on earnings per share.

Loss per Common Share

The Company has adopted the provisions of ASC 260, *Earning per Share* . ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. 

On August 22, 2011 we enacted a split of the common stock in the amount of 20:1. The stock split was effective April 22, 2011 for holders of record as of that date. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this reverse split. All per share disclosures retroactively reflect shares outstanding or issuable as though the reverse split had occurred from inception.

Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock

We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815, *Accounting for Derivative Financial Instruments*. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock 

Financial Instruments

The Company’s financial assets and liabilities consist of cash, accounts receivable, and accounts payable. Except as otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due to the short-term maturities of these instruments.

Start-up Costs

In April 1998, the American Institute of Certified Public Accountants issued Statement of Position No. 98-5, "Reporting for Costs of Start-Up Activities" ("SOP 98-5"). Pursuant to this statement, the Company is required to expense all start-up costs related to new operations. Accordingly, the Company has expensed organization costs of $480 in the year ended June 30, 2007.

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Deferred Offering Costs

 

Deferred offering costs consists of expenses incurred that are directly related to a public offering. If funds are raised from the public offering, these costs will be offset against stockholders' equity. If no funds are raised, these costs will be expensed in full.

Reclassification

Certain reclassifications have been made in the 2010 financial statements to conform to the June 30, 2011 presentation.

Recent Accounting Standards

In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2009-13 (ASU 2009-13), which provided an update to ASC 605.  ASU 2009-13 addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting in multiple-deliverable arrangements. The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company is currently evaluating the impact that this update will have on its Financial Statements. In June 2009, the FASB created the Accounting Standards Codification, which is codified as ASC 105.  ASC 105 establishes the codification as the single official non-governmental source of authoritative accounting principles (other than guidance issued by the SEC) and supersedes and effectively replaces previously issued GAAP hierarchy framework.  All other literature that is not part of the codification will be considered non-authoritative.  The codification is effective for interim and annual periods ending on or after September 15, 2009.  The Company has applied the codification, as required, beginning with the 2009 Form 10-K.  The adoption of the codification did not have a material impact on the Company’s financial position, results of operations or cash flows.     

In June 2009, the FASB updated ASC 855, which established principles and requirements for subsequent events.  This guidance details the period after the balance sheet date which the Company should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which the Company should recognize events or transactions occurring after the balance sheet date in its financial statements and the required disclosures for such events.  ASC 855 is effective for interim and annual periods ending after June 15, 2009.  The implementation of ASC 855 did not have a material effect on the Company’s financial statements.  The Company adopted ASC 855, and has evaluated all subsequent events through February 25, 2010.

 

In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”). SFAS 167 amends FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” to require an enterprise to qualitatively assess the determination of the primary beneficiary of a variable interest entity (VIE) based on whether the entity (1) has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. Also, SFAS 167 requires an ongoing reconsideration of the primary beneficiary, and amends the events that trigger a reassessment of whether an entity is a VIE. Enhanced disclosures are also required to provide information about an enterprise’s involvement in a VIE. This statement shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company does not expect the adoption of SFAS 167 to have a material impact on its consolidated financial statements.

In June 2009, the FASB issued guidance now codified as ASC 105, *Generally Accepted Accounting Principles* as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP, aside from those issued by the SEC. ASC 105 does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. The adoption of ASC 105 did not have a material impact on the Company’s financial statements, but did eliminate references to pre-codification standards.

 The Company adopted ASC Topic 855 (Subsequent Events).   . ASC 855  establishes guidance related to accounting for and disclosure of events that happen after the date of the balance sheet but before the release of the financial statements. ASC Topic 855  is effective for reporting periods ending after June 15, 2009. The Company adopted ASC 855 on June 30, 2009. ASC 855 affects disclosures only.

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Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

NOTE 2 - INCOME TAXES

The Company must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

 

Deferred income taxes are recorded in accordance with ASC 740, *Accounting for Income Taxes*. Under ASC 740, deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of net deferred tax assets is dependent upon generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards.

 

The Company has determined it more likely than not that these timing differences will not materialize and has provided a valuation allowance against substantially all of its net deferred tax assets. The Company's management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If the assessment of the deferred tax assets or the corresponding valuation allowance were to change, the related adjustment to income would be recorded during the period in which the determination is made. The tax rate may also vary based on results and the mix of income or loss in domestic and foreign tax jurisdictions in which the Company operates.

 In addition, the calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. Recognition of liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions is based on estimates of whether, and to the extent to which, additional taxes will be due. If it is ultimately determined that payment of these amounts is unnecessary, the liability will be reversed and a tax benefit will be recognized during the period in which it is determined that the liability is no longer necessary. An additional charge in the provision for taxes will be recorded in the period in which it is determined that the recorded tax liability is less than the ultimate assessment is expected to be.

Uncertain Tax Positions

The Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN No. 48”) which was effective for the Company on January 1, 2007.  FIN No. 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under FIN No. 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.  The tax benefits recognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.  FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements.

Our federal and state income tax returns are open for fiscal years ending on or after June 30, 2007. We are not under examination by any jurisdiction for any tax year. At June 30, 2011 we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required.

At June 30, 2011, the Company had net deferred tax assets of approximately $27,800 principally arising from net operating loss carryforwards for income tax purposes. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all our net deferred tax asset.

Future utilization of currently generated federal and state NOL and tax credit carry forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state provisions. The annual limitation may result in the expiration of NOL and tax credit carry-forwards before full utilization.

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NOTE 3 - DEVELOPMENT STAGE COMPANY

 

The Company has not begun principal operations and as is common with a development stage company, the Company will have recurring losses during its development stage.  The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  However, the Company does not have significant cash or other material assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern.  In the interim, shareholders of the Company have committed to meeting its minimal operating expenses.

NOTE 4 - COMMITMENTS

As of June 30, 2011, all activities of the Company have been conducted by corporate officers from either their homes or business offices.  Currently, there are no outstanding debts owed by the company for the use of these facilities and there are no commitments for future use of the facilities.

NOTE 5 – RELATED PARTY TRANSACTIONS

In 2008-2009, Mr. West, the Company's former principal stockholder advanced $24,180 to the Company. 

Also in 2008-2009, Mr. West also provided services, valued at $2,000 per month and office space valued at $200 per month. The total value of $13,200 was reflected as an operating expense in 2009.  The Company accounted for this as a capital transaction and was obligated to issue 7,329 shares. 

In 2010, the common stock agreement was rescinded. The common shares were cancelled. Under the terms of the agreement Mr. West accepted the marketable securities valued at $4,010 and forgave approximately $3,255 in amounts due him in exchange for returning the 7,329 shares of common stock. 

.

In 2010, Infanto Holdings LLC, whose principal stockholder Joseph C. Passalaqua is also a principal stockholder of Highlight Networks, Inc., loaned the Company $10,654.  These notes are accruing 18% simple interest. As of June 30, 2011, the Company owes $10,654 in principal and $1,722 in interest related to these notes.

NOTE 6 – MARKETABLE SECURITIES

All securities are equity securities and are classified as available-for-sale. In 2009 the Company had determined a decline in fair value below the cost basis is other than temporary. Therefore the cost basis of the individual security was written down to fair value. The impairment of $2,000 was recorded in 2009. In 2010 the marketable securities were returned to Mr. West upon the rescission of the agreement to issue 7,329 shares to him.

NOTE 7 - COMMON STOCK TRANSACTIONS

The Company is authorized to issue 150,000,000 shares of common stock, with par value of $0.001 per share. As of June 30, 2011, a total of 2,914,600 shares of common stock were issued and outstanding. Holders of common stock are entitled to receive dividends, when and if declared by the board of directors, subject to prior rights of holders of any preferred stock then outstanding and to share ratably in the net assets of the company upon liquidation. Holders of common stock do not have preemptive or other rights to subscribe for additional shares. The articles of incorporation do not provide for cumulative voting. Shares of common stock have equal voting, dividend, liquidation and other rights, and have no preference, exchange or appraisal rights.

 

On June 21, 2007, the Company issued 500,000 shares of common stock, which are restricted as to transferability, to its founders and directors for $500 offset against current notes payable.  On July 16, 2007, the Company issued 250,000 shares of common stock in exchange for $5,000 cash.  In November, 2007, the Company split the common stock two for one, leaving 1,500,000 issued and outstanding.

  

In November, 2008, the Company had purchase agreements for 260 shares of common stock in exchange for $1,329 cash. In March, 2009, the Company issued 7,329 shares of common stock, which are restricted as to transferability, to its one of its founders and directors for $37,380 offset against current notes payable.

In 2008-2009, Mr. West also provided services, valued at $2,000 per month and office space valued at $200 per month. The total value of $13,200 was reflected as an operating expense in 2009.  The Company accounted for this as a capital transaction and was obligated to issue 7,329 shares.  In 2010, the common stock agreement was rescinded. The common shares were cancelled. Under the terms of the agreement Mr. West accepted the marketable securities valued at $4,010 and forgave approximately $3,255 in amounts due him in exchange for returning the 7,329 shares of common stock. 

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On February 24, 2010 the Company issued 940 shares of common stock, of which 260 were previously purchased and listed as issued in November, 2008.  

As of the previous year ended June 30, 2010, there were 1,500,940 shares of common stock outstanding. For the current year ended June 30, 2011, the Company has issued an additional 20,040 shares of common stock. 

·

On September 7, 2010 the Company issued 100 shares of common stock at   $5.10 per share.

·

On September 24, 2010 the Company issued 160 shares of common stock at $5.10 per share.

·

On October 27, 2010 the Company issued 3,600 shares of common stock at   $5.10 per share.

·

On November 2, 2010 the Company issued 700 shares of common stock at    $5.10 per share.

·

On March 8, 2011 the Company issued 5,880 shares of common stock at $5.10 per share.

·

On March 8, 2011 the Company issued 3,600 shares of common stock to Officers of the Company for services rendered at $2.55 per share. As of June 30, 2011, this was evaluated and the fair market value was adjusted to $5.10 per share.

·

On April 21, 2011 the Company issued 6,000 shares of common stock to Officers of the Company for services rendered at $5.10 per share.

On April 22, 2011, Highlight Networks had a resolution and amended the Articles of Incorporation to include a 20/1 forward stock split, with all fractional shares being dropped with the effect being retroactive back to inception. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this reverse split.

On May 19, 2011, the majority shareholder retired 28,000,000 shares of common stock previously issued back to the Company.

As of June 30, 2011 Highlight Networks has 150,000,000 shares of common stock authorized at $0.001 par value per share and 2,419,600 shares of common stock issued and outstanding

NOTE 8 – SUBSEQUENT EVENTS

Highlight Networks, Inc. evaluated all events subsequent to June 30, 2011 through August 25, 2011 and concluded that there are no significant or material transactions to be reported for the period from July 1, 2011 to August 25, 2011.

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SIGNATURES

  

Pursuant to the requirements of Section 13 or 15(d) 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.

  

HIGHLIGHT NETWORKS, INC.

  

Date: August 25, 2011  

by: /s/ Anthony Lombardo        

Anthony Lombardo         

President and Chief Executive Officer

by: /s/ Damion Glushko        

Damion Glushko

Secretary; Director; Chief Financial Officer

  

Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the Registrant and in the capacities and on the dates indicated have signed this report below.

  

by: /s/ Anthony Lombardo

Anthony Lombardo

President and Chief Executive Officer

(Principal Executive Officer)

by: /s/ Damion Glushko        

Damion Glushko

Secretary; Director; Chief Financial Officer

(Principal Financial Officer)

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