Xiamen Lutong International Travel Agency Co., Ltd. - FORM 10-K

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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, 2014

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)

7325 Oswego Road, Liverpool, NY		13090
(Address of principal executive offices)		(Zip Code)

P.O. Box 3143, Liverpool, NY		13089
(Mailing address)		(Zip Code)

(315) 451-4722

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

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 [X] No

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 [X] No

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. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X] Yes [ ] No

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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and" smaller reporting company" in Rule 12b-2 of the Exchange Act.

[ ] Large accelerated filer Accelerated filer

[ ] Non-accelerated filer

[X] Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates: $1,105,476 based on 2,167,600 non affiliate shares outstanding at $0.51 per share, which is the average bid and asked price of the common shares as of the last business day of the registrant’s most recently completed second fiscal quarter.

As of September 22, 2014 there were outstanding 14,167,600 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, 2014

PART I	PAGE

Item 1. Description of Business	4
Item 2. Properties	8
Item 3. Legal Proceedings	8
Item 4. Mining Safety Disclosure	8

PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters and Issuer Purchases of Equity Securities	9
Item 6. Selected Financial Data	10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 8. Financial Statements and Supplementary Data	15
Financial Statements and Notes to Financial Statements	F-1 – F-12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	16
Item 9A. Controls and Procedures	16

PART III

Item 10. Directors and Executive Officers of the Registrant	18
Item 11. Executive Compensation	19
Item 12. Security Ownership of Certain Beneficial Owners and Management	20
Item 13. Certain Relationships and Related Transactions	22
Item 14. Principal Accountant Fees and Services	23
Item 15. Exhibits	24

Signatures	25

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" means 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

The Company was formed on June 21, 2007 as a Nevada corporation. The Company has a June 30 year end. The Company commenced its principal revenue producing activities during 2013 and generated revenue of $48,819 during the year ended June 30, 2013 and $7,303 during the year ended June 30, 2014.

On March 11, 2013, EZ Recycling, Inc. was formed and incorporated to serve as a wholly owned subsidiary of Highlight Networks, Inc. EZ Recycling is incorporated in the State of Nevada. All inter-company balances and transactions are eliminated in consolidation.

Nature of Business and Inventory

In the previous year, the Company announced a new business venture in recycling, refining, metals trading and assisting in metal recovery, with a focus on precious metals refining from electronic waste. In 2013 and 2014, the company purchased scrap metal and used circuit boards that are for the purpose of sending these items out for recycling, refining and processing and the Company bought and sold items on EBAY.

As of June 30, 2014, the company has recognized $56,122 in revenue and $56,577 in COGS from the processing, recycling, refining or sale of inventory. Inventories are periodically monitored to ensure that the reserve for obsolescence covers any obsolete items. As of June 30, 2014, there was no reserve for obsolescence. Inventories are valued at the lower of cost (using average cost) or market.

Plan of Operation

The Company is in engaged in the business of electronic recycling. At present the Company has a letter of intent to acquire an existing electronic recycler and then expand its low and medium grade electronics into recycling of high end electronic equipment and board recycling. Depending on the future capital raised the company will continue to expand the Target’s current business and continue to acquire additional recycling locations.

In addition, HNET intends to development a network of independent recyclers to collect e-waste on its behalf. Lastly, the HNET intends to contract with large manufactures and user of electronic equipment to clean and destroy hard drives and recycle the equipment in an environmentally safe manner.

The implementation of this plan will depend on the ability to raise capital. There is no assurance that the company will be available to raise the necessary capital or successfully implement the business plan.

Industry

Expanding legislation mandating proper disposal of e-waste and the protection of personal information, combined with the “green movement” and privacy concerns regarding data that may be resident on electronic devices, has created a need and a market for responsible e-waste disposition and data eradication services. 25 States have already passed some form of e-waste law and several others are actively pursuing legislation. In addition to privacy laws like HIPAA and Gramm Leach Bliley, intended to protect medical record and consumer privacy, recently a new law was introduced banning the unlocking of cell phones to protect data contained in their memory demonstrating awareness and fears associated with identity theft are increasing.

The FTC estimates that as many as 9 million of us have our identity stolen each year. It’s topped the list of consumer complaints filed with the agency for the past 12 years running, garnering about 15% of all complaints. And new research from ID Analytics shows that there are roughly 10,000 identity theft rings in the United States involved in this fast-growing illegal enterprise.

Now, the latest movement in the e-scrap recycling industry is to reduce or eliminate the exporting of e-scrap to developing countries. Newsweek, 60-Minutes and other media outlets as well as activist organizations are targeting e-scrap exporters in an effort to stop this potential threat to human health and the environment in countries that don’t have the infrastructure to protect themselves.

In July of 2011 the Federal government released the INTERAGENCY TASK FORCE ON ELECTRONICS STEWARDSHIP initiative sponsored by the White Houses’ National Strategy for Electronics Stewardship. Among other things the Federal government commits to “Increase Safe and Effective Management and Handling of Used Electronics in the United States” and to “Reduce Harm from US Exports of E-Waste and Improve Safe Handling of Used Electronics in Developing Countries and stated categorically that “the Federal Government will Lead By Example”, in response the Feds announced that they will now only work with “Certified” recyclers. Immediately industry responded “Me Too”. This announcement resulted in an explosion of e-scrap companies rushing to gain certification. The two certifications that are currently recognized are e-Stewards by the Basal Action Network (BAN) and R2 sponsored by ISRI. Among many other compliance guidelines, the restriction or elimination of exports of certain types of e-scrap is restricted and specifically targeted non-OECD countries are off limits.

Here are some facts and figures recently released in the report from the U.S. International Trade Commission:

*Graph Source Document: USITC Publication 4379

In 2011, the U.S. exported 757,721 tons of e-scrap.
By weight, the largest end use of exported used electronics was "materials processing," with 323,772 tons of material sent to other countries for sorting, smelting, or refining. This category made up 43 percent of all end uses.
The top five destinations for U.S. exports of e-scrap in 2011 were Mexico, India, Hong Kong, China and South Korea, accounting for 74 percent of exports.

In 2012, for the first time principles from one e-scrap Company were found guilty of illegally exporting to a non-OECD country and another major company is similarly under investigation. Both companies were certified but were found to be conducting business outside their certification agreements.

So, what does all this really mean? There is change occurring rapidly in the e-scrap industry, the new focus is to reduce risk liability and identity theft and exportation are perceived as the new target objectives for change and the integrity of the e-scrap industry is under close scrutiny.

What is the answer? The comprehensive Environmental Management Systems (R2 and e-Stewards) are designed to create a system by which the compliance to specific environmental and human health and safety standards, agreed to by industry stakeholders and government agencies, can be measured and compliance certified in order to give individuals and companies comfort that the various risks associated with the disposal of electronics assets are properly managed but, few things are quite as compelling to weary customers as seeing their fears dissolve as product is shredded and separated into fragments.

Competition

The end-of-life of the e-scrap business is divided into a few fundamental categories: ITAM, Brokers and Recyclers.

* Graph Source Document: USITC Publication 4379 provides a good overview of this complex supply chain.

ITAM

IT Asset Management is typically a fee for service business focuses on Reverse Logistics services, asset auditing and reselling of tested working products. ITAM companies typically downstream their scrap products to dismantler, shredders or exporters of e-scrap.

This model tends toward Fortune 500 companies with high intolerance for risk willing to pay for services.

Brokers

Many companies that hold themselves out as e-scrap end-of-life providers are in reality export brokers. The traditional broker merely pairs the seller with a buyer. However, new certification compliance initiatives will reduce the brokerage traffic by including language requiring product be transformed by method as part of the downstream vendor management process. Accordingly, brokers in e-waste will not capable of simply selling the material overseas but will require a recycler to handle the material.

Recyclers

Separated into two distinct types by technology and labor are dismantlers and shredders.

A dismantler separates the various components using physical labor. Hammers, drill guns and muscle are the tools of choice. While scalable, return on labor investment necessitates a homogenized stream of products for any efficiency, varied mixes and low value products (printers, docking stations, etc.) are virtually impossible to dismantle with a positive return for labor over commodity generated. Additionally, the ultimate disposition (death) of dismantled products is still in question to the risk sensitive customer and consumer requiring that they receive a certification that the information contained within the material is destroyed and the hardware is disposed of properly.

A shredder uses technology, replacing the high cost of labor, to separate products into their base commodities. This technology leaves no doubt that the disposition of the products and the risks associated to business proprietary or individual confidentiality are eliminated. This option is not available to many recyclers due to the cost of entry. AER is postured to handle both the destruction of sensitive information and the destruction of hardware.

Hybrid

A hybrid recycler employs numerous of these strategies to effectively manage the individual product streams to minimize risk, engender process confidence and environmental compliance while maximizing financial gain. AER has made the necessary investments in infrastructure and technology and is a hybrid recycler.

ITEM 2. PROPERTIES

None

ITEM 3. LEGAL PROCEEDINGS

None

ITEM 4. MINING SAFETY DISCLOSURE

Not Applicable.

PART II

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

Market Information

Our common stock is listed for trading on the Over the Counter Bulletin Board under the symbol "HNET". Our shares have only experienced trading activity since June 2012. The following table sets forth the high and low bid prices for the Company’s common stock for the periods indicated. The prices below reflect inter-dealer quotations, without retail mark-up, mark-down or commissions and may not represent actual transactions.

	High	Low
Quarter ended June 30, 2013	$1.60	$1.60

Quarter ended September 30, 2013	$1.51	$1.51

Quarter ended December 31, 2013	$0.51	$0.51

Quarter ended March 31, 2014	$0.28	$0.26

Quarter ended June 30, 2014	$0.31	$0.31

Dividends

We have not paid any dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon then-existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our Board of Directors deems relevant.

Holders of Record

As of June 30, 2014, we had approximately 61 shareholders of record of our common stock and 14,167,600 shares issued and outstanding.

ITEM 6. SELECTED FINANCIAL DATA

The table below summarizes our consolidated balance sheets at June 30, 2014 compared to 2013 and consolidated statements of operations for the year ended June 30, 2014 compared to 2013.

	At June 30,
	2014			2013
Balance Sheet:
Cash	$	6,081		$	50,010
Total Assets		18,456			66,316
Total Liabilities		590,407			209,868
Total Stockholders’ Deficit	$	(571,951	)	$	(143,552	)

	Years Ended June 30,
	2014			2013
Statement of Operations:
Revenue	$	7,303		$	48,819
Net Loss		(8,453,056	)		(684,642	)
Net Loss Per Share of Common Stock	$	(0.85	)	$	(0.27	)

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 contain 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, 2014 compared to the year ended June 30, 2013

Revenues

Our total revenue decreased by $41,516, from $48,819 in the year ended June 30, 2013 to $7,303 in the year ended June 30, 2014. As of June 30, 2014, the principal revenue was from recycling, refining, metals trading and assisting in metal recovery, with a focus on precious metals refining from electronic waste.

Cost of Goods Sold

Our overall cost of goods sold decreased by $50,699, from $53,638 in the year ended June 30, 2013 to $2,939 in the year ended June 30, 2014. As of June 30, 2014, the principal costs of goods sold related to the ongoing operations are treatment, refining and assay fees from the metal recycling process.

Operation and Administrative Expenses

Operating expenses which includes accounting and legal expenses, administrative expenses and rent increased by $7,611,445, from $676,640 in the year ended June 30, 2013 to $8,288,085 in the year ended June 30, 2014.

Interest expense increased by $74,008, from $3,183 in the year ended June 30, 2013 to $77,191 in the year ended June 30, 2014.

Net loss per share was $0.27 for the year ended June 30, 2013 and $0.85 for the year ended June 30, 2014. The weighted average shares outstanding were 2,517,545 for the year ended June 30, 2013 and 10,003,107 for the year ended June 30, 2014.

As of June 30, 2014, 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.

Net Loss

The Company had a net loss of $684,642 for the year ended June 30, 2013 as compared to a net loss of $8,453,056 for the year ended June 30, 2014.

Cash Flow

Our primary source of liquidity has been cash from shareholder loans.

Working Capital

As of June 30, 2013, the Company had total current assets of $66,316 and total current liabilities of $209,868, resulting in a working capital deficit of $143,552. As of June 30, 2014, the Company had total current assets of $18,456 and total current liabilities of $590,407, resulting in working capital of $571,951.

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.

Through June 30, 2014, the Company’s previous principal officer and majority shareholder and current principal shareholder have provided services and loans to the company in order for it to continue operations.

During the years ended June 30, 2008 and 2009, Mr. West, the Company's former principal stockholder, advanced a total $24,180 to the Company. In March 2009, these advances were forgiven by Mr. West and reclassified as additional paid-in capital. Also during the years ended June 30, 2008 and 2009, Mr. West provided services, valued at $2,000 per month and office space valued at $200 per month, for a total of $13,200, which was reflected as an operating expense in fiscal year ended June 30, 2009. The Company issued 7,329 shares of its $.001 par value common stock to Mr. West as payment for his services and use of office space; however, during the year ended June 30, 2010, the original common stock agreement was rescinded. Under the terms of a new agreement, the 7,329 shares originally issued to Mr. West were cancelled and replaced with marketable securities valued at $4,010. Mr. West forgave the balance due to him of approximately $3,255.

Infanto Holdings LLC, whose principal stockholder Joseph C. Passalaqua is also an officer and principal stockholder of Highlight Networks, Inc., loaned the Company $2,900, $3,684 and $6,880 during years ended June 30, 2012, 2011, and 2010, respectively, which totaled $13,464. These notes were unsecured, accrued simple interest annually at 18% and were due on demand. On April 27, 2012, the Company repaid, in full, the total principal due of $13,464 plus accrued interest of $3,676, for a total payment of $17,140.

During September 2013, the Company modified outstanding note agreements, with an aggregate principal amount of $170,732, with related parties, Friction & Heat LLC and Joseph Passalaqua whereby a conversion option was added. The promissory notes were originally unsecured, bore simple interest at 10% per annum and were due on demand. These loans were modified into convertible notes that are unsecured, mature 1 year from the date of the note and bear simple interest at 10% per annum. The notes are convertible into common stock at 60% of the average of the lowest 3 trading prices during the 10 days preceding the date of conversion. The note holders have agreed to not convert into more common shares than the Company has available and authorized at any time. The Company evaluated the convertible loan modification and determined it qualified as an extinguishment of debt due to a substantive conversion option being added. The Company then evaluated the convertible notes under ASC 815 and determined the notes do not qualify as derivative liabilities. The Company then evaluated the notes for a beneficial conversion feature under ASC 470-20 as of the date of the notes and determined that beneficial conversion features existed. The aggregate intrinsic value of the beneficial conversion features was determined to be $145,990 and was recognized as a discount to the debt that is being amortized using the effective interest method over the life of the notes. During the year ended June 30, 2014, amortization of $53,846 was recognized.

In January 2014, the unsecured convertible notes that were due to a related party were modified whereby the conversion option was removed. These notes with an aggregate principal amount of $223,182 were reclassified in multiple promissory notes, bear simple interest at 10% per annum and are payable upon demand. The Company evaluated the convertible loan modification and determined it qualified as an extinguishment of debt due to a substantive conversion option being removed. The unamortized discounts on the original notes were written-off resulting in a loss on the extinguishment of debt of $92,144 during the year ended June 30, 2014.

During 2013 and 2014, the Company borrowed an aggregate of $363,525 from related parties and repaid an aggregate of $40,498 on the related party debt. The outstanding related party debt is held in unsecured promissory notes, bears interest at 10% per annum and matures between on demand and June 30, 2015. As of June 30, 2014, none of the outstanding related party debt is convertible and the aggregate unpaid principal on these related party notes was $323,027, with interest accrued of $22,176.

During 2013 and 2014, the Company incurred liabilities for unpaid rent at $8,000 monthly to Remix Ventures, LLC, according to a signed rental agreement. Joseph C. Passalaqua the sole managing member of Remix Ventures, LLC and an officer of Highlight Networks, Inc. As of June 30, 2014, the unpaid amount for rent was $128,000.

During 2013 and 2014, the Company incurred liabilities for the reimbursement of property taxes that were paid by Remix Ventures, LLC, according to a signed rental agreement. Joseph C. Passalaqua is the sole managing member of Remix Ventures, LLC and an officer of Highlight Networks, Inc. As of June 30, 2014, the unpaid amount for property tax reimbursement to Remix Ventures LLC was $42,165.

In 2013, EZ Recycling, Inc., the wholly owned subsidiary of Highlight Networks, Inc. borrowed $100 from a related party, Joseph C. Passalaqua. The amount is non-interest bearing advance. As of June 30, 2014 the unpaid amount on the advance was $100.

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.

The Company accounts for share based payments to nonemployees in accordance with FASB ASC 505-50. The fair value of equity instruments issued to a nonemployee is measured by using the stock price and other measurement assumptions as of the date of either: (i) a commitment for performance by the nonemployee has been reached; or (ii) the counterparty’s performance is complete. Expenses related to nonemployee awards are generally recognized in the same period and in the same period as the Company incurs the related liability for goods and services received.

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.

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

Common Stock

The Company is authorized to issue 150,000,000 shares of common stock, with par value of $0.001 per share.

In the year ended June 30, 2013, 2,894,600 common shares were issued and in the year ended June 30, 2014, 11,273,000 common shares were issued.

On April 17, 2013, the Company issued 175,000 shares of common stock to a nonemployee for consulting services valued at $262,500.

On April 15, 2013, the Company granted an aggregate of 300,000 common shares to officers of the Company for services to be rendered. 150,000 shares vested immediately on April 15, 2013 and 150,000 shares vest on May 1, 2014. The shares were valued at $450,000 of which $269,882 was recognized during the year ended June 30, 2013 and $179,634 was recognized during the year ended June 30, 2014.

On September 18, 2013, the company issued 48,000 common shares under a consulting agreement. The shares were fully earned upon execution of the agreement and were valued using the closing stock price of the Company’s common stock at September 18, 2013. The Company recognized the full fair value of these shares of $72,720 as an expense during the year ended June 30, 2014.

On November 1, 2013, the Company committed to issue 4,000,000 common shares in an agreement to a structuring agent. Of these shares, 1,000,000 were issued and fully earned upon execution of the agreement as compensation and the remaining 3,000,000 are due when certain performance objectives are met. The Company recognized the full fair value of the 1,000,000 shares issued and earned of $627,000 during the year ended June 30, 2014. The fair value of the remaining 3,000,000 shares was determined to be $930,000 and it is being recognized over the expected successful completion date of the performance conditions of September 30, 2014. During the year ended June 30, 2014, $673,063 was recognized as expense for the 3,000,000 shares and $256,937 will be recognized through the expected completion date of the performance conditions.

On November 11, 2013, the Company issued 10,000,000 shares of common stock to the majority shareholder for consulting services. The shares were fully earned upon issuance. The Company recognized the full fair value of the 10,000,000 shares of $6,270,000, based upon the closing price of our common stock of $0.63 on November 11, 2013, during the year ended June 30, 2014.

On February 17, 2014, the company issued 225,000 common shares under a consulting agreement. The shares were fully earned upon execution of the agreement. The Company recognized the full fair value of the 225,000 shares of $56,250, based upon the closing price of our common stock of $0.25 on March 13, 2014, during the year ended June 30, 2014. As of the year ended June 30, 2014 there were 14,167,600 shares of common stock issued and outstanding.

Preferred Stock

On July 16, 2013, the Company Amended the Articles of Incorporation to state that the Company is authorized to issue 20,000,000 shares of Preferred Stock. The Amendment was effective when the Certificate of Amendment was filed with the Secretary of the State of Nevada on July 18, 2013. As of June 30, 2014, there were 0 shares of Highlight Networks, Inc. $0.001 par value preferred stock 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.

Financial statements table of contents


Report of Independent Registered Public Accounting Firm		F-1

Consolidated Balance Sheets as of June 30, 2014 and 2013		F-2

Consolidated Statements of Operations for the years ended June 30, 2014 and 2013		F-3

Consolidated Statements of Stockholders’ Deficit for the years ended June 30, 2014 and 2013		F-4

Consolidated Statements of Cash Flows for the years ended June 30, 2014 and 2013		F-5

Notes to Consolidated Financial Statements		F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Highlight Networks, Inc.

Liverpool, New York

We have audited the accompanying consolidated balance sheets of Highlight Networks, Inc. and its subsidiary (collectively, the “Company”) as of June 30, 2014 and 2013 and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Highlight Networks, Inc. and its subsidiary as of June 30, 2014 and 2013 and the results of their operations and their cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has generated net losses since its inception and has a working capital deficit as of June 30, 2014. The Company requires additional funds to meet its obligations and the costs of its operations. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

September 22, 2014

F-1

HIGHLIGHT NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS

		June 30,			June 30,
		2014			2013
ASSETS
Current Assets:
Cash	$	6,081		$	50,010
Accounts receivable		—			1,182
Prepaid expenses		1,427			2,055
Inventory		10,948			13,069
Total Current Assets		18,456			66,316

Total Assets	$	18,456		$	66,316

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable	$	69,939		$	8,855
Accrued expenses		27,176			7,683
Accounts payable to related parties		170,165			32,000
Advances from related party		100			100
Notes payable to related parties		323,027			161,230
Total Current Liabilities		590,407			209,868

Stockholders' Deficit:
Preferred stock, $.001 par value; 20,000,000 shares authorized;
no shares outstanding as of June 30, 2014 and June 30, 2013		—			—
Common stock; $.001 par value; 150,000,000 shares authorized;
14,167,600 shares outstanding as of June 30, 2014 and
2,894,600 shares outstanding as of June 30, 2013		14,168			2,895
Additional paid-in capital		8,698,757			685,373
Accumulated deficit		(9,284,876	)		(831,820	)
Total Stockholders' Deficit		(571,951	)		(143,552	)

Total Liabilities and Stockholders' Deficit	$	18,456		$	66,316

The accompanying notes are an integral part of these consolidated financial statements.

F-2

HIGHLIGHT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended
	June 30,
	2014			2013
Revenues:
Income	$	7,303		$	48,819
Cost of goods sold		(2,939	)		(53,638	)
Gross profit (loss)		4,364			(4,819	)

Operating Expenses:
Consulting expense		6,249,470			532,382
General and administrative		1,942,615			112,258
Rent expense		96,000			32,000
Total Operating Expenses		8,288,085			676,640

Loss from Operations		(8,283,721	)		(681,459	)

Other Expenses:
Interest expense		(77,191	)		(3,183	)
Loss on extinguishment of debt		(92,144	)		—

Net Loss	$	(8,453,056	)	$	(684,642	)

Net loss per share - basic and diluted	$	(0.85	)	$	(0.27	)

Weighted average shares outstanding - basic and diluted		10,003,107			2,517,545

The accompanying notes are an integral part of these consolidated financial statements.

F-3

HIGHLIGHT NETWORKS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
YEARS ENDED JUNE 30, 2014 AND 2013

			Additional		Total
	Common Stock		Paid-in	Accumulated	Stockholders'
	Shares	Par Value	Capital	Deficit	Deficit
Balance at June 30, 2012	2,419,600	$ 2,420	$ 153,466	$ (147,178)	$ 8,708

Stock issued for services	475,000	475	531,907	-	532,382

Net loss	-	-	-	(684,642)	(684,642)

Balance at June 30, 2013	2,894,600	2,895	685,373	(831,820)	(143,552)

Stock issued for services	11,273,000	11,273	7,867,394	-	7,878,667

Debt discount due to beneficial conversion feature	-	-	145,990	-	145,990

Net loss	-	-	-	(8,453,056)	(8,453,056)

Balance at June 30, 2014	14,167,600	$ 14,168	$ 8,698,757	$ (9,284,876)	$ (571,951)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

HIGHLIGHT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended
	June 30,
	2014	2013

Cash flows from operating activities
Net loss	$ (8,453,056)	$ (684,642)
Adjustments to reconcile net loss to net cash
used in operating expenses:
Amortization of debt discounts	53,846	-
Stock-based compensation	7,878,667	532,382
Loss on extinguishment of debt	92,144	-
Changes in operating assets and liabilities:
Accounts receivable	1,182	(1,182)
Inventory	2,121	(13,069)
Prepaid expenses	628	(2,055)
Accounts payable and accrued expenses	80,577	9,538
Accounts payable to related parties	138,165	32,000
Net cash used in operating activities	(205,726)	(127,028)

Cash flows from financing activities
Proceeds from notes payable to related parties	202,295	161,330
Payments on related party debt borrowings	(40,498)	-
Net cash provided by financing activities	161,797	161,330

Net (decrease) increase in cash	(43,929)	34,302
Cash at beginning of period	50,010	15,708
Cash at end of period	$ 6,081	$ 50,010

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$ 4,352	$ -
Income taxes	-	-

Non-cash investing and financing activities:
Debt discount due to beneficial conversion feature	$ 145,990	$ -

The accompanying notes are an integral part of these consolidated financial statements.

F-5

HIGHLIGHT NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Organization and summary of significant accounting policies

Organization and Nature of Business

Highlight Networks, Inc. (“the Company”) was formed on June 21, 2007 as a Nevada corporation. In 2013 the Company has commenced operations and is no longer considered a development stage company. The Company has a June 30 year end.

During 2013, the Company began new business venture in recycling, refining, metals trading and assisting in metal recovery, with a focus on precious metals refining from electronic waste. The Company commenced its principal revenue producing activities during 2013 and generated revenue of $48,819 during the year ended June 30, 2013 and $7,303 during the year ended June 30, 2014.

The Company’s principal executive offices are located at 7325 Oswego Road Liverpool, NY 13090. As of February 19, 2013 the Company also has a rental agreement for a warehouse property located at 6 Alder East Syracuse, NY 13057. Our telephone number is (315) 451-4722.

The Company’s Articles of Incorporation state that the Company is authorized to issue 150,000,000 shares of common stock, with par value of $0.001 per share. On July 16, 2013, the Company Amended the Articles of Incorporation to state that the Company is authorized to issue 20,000,000 shares of Preferred Stock. The Amendment was effective when the Certificate of Amendment was filed with the Secretary of the State of Nevada on July 18, 2013.

Principles of Consolidation

On March 11, 2013, EZ Recycling, Inc was formed and incorporated to serve as a wholly owned subsidiary of Highlight Networks, Inc. EZ Recycling is incorporated in the State of Nevada. All inter-company balances and transactions are eliminated in consolidation. The Company has a June 30 year end.

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.

Allowance for Doubtful Accounts

Accounts Receivable was $0 and $1,182 of June 30, 2014 and 2013, respectively. The Company recognizes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectibility. Bad debt reserves are maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Company becomes aware of a customer’s inability to meet its financial obligation, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. As of June 30, 2014 and 2013, the Company has determined an allowance for doubtful accounts is not necessary.

F-6

Inventory

As of June 30, 2014, the company had 6,475 lbs. of scrap metal and used circuit boards in inventory and has recognized $55,698 in revenue from the processing, recycling, refining or sale of inventory. Inventories are periodically monitored to ensure that the reserve for obsolescence covers any obsolete items. As of June 30, 2014, there was no reserve for obsolescence. Inventories are valued at the lower of cost (using average cost) or market.

As of June 30, 2014, the company had 444 items of EBAY merchandise in inventory and has recognized $424 in revenue from the sale of this merchandise in inventory. Inventories are periodically monitored to ensure that the reserve for obsolescence covers any obsolete items. As of June 30, 2014, there was no reserve for obsolescence. Inventories are valued at the lower of cost (using average cost) or market.

Inventory consisted of the following finished goods as of June 30, 2014 and 2013:

	June 30,		June 30,
	2014		2013
EBAY merchandise	$	6,084	$	6,186
Scrap metal		4,864		6,883
Total inventory	$	10,948	$	13,069

Revenue Recognition

The Company recognizes revenue in accordance with FASB ASC 605 when persuasive evidence of an arrangement exists, the product has been delivered or services have been performed, the selling price is fixed or determinable, and collection is reasonably assured and there are no further obligations to customers. Revenue is recognized when a product is delivered or shipped to the customer and all material conditions relating to the sale have been substantially performed. For cash received in advance for goods, the Company records a liability classified as deferred revenue. As of June 30, 2014 and 2013, there was no deferred revenue.

Concentrations

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 $6,081 and $50,010 as of June 30, 2014 and 2013, respectively, all of which was fully covered by federal depository insurance.

During the year ended June 30, 2013, 84% of the Company’s revenue was generated from a single customer, David & Company LLC. During the year ended June 30, 2014, 94% of the Company’s revenue was generated from a single customer, Colt Recycling.

Use 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.

F-7

Stock-Based Compensation

The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. FASB ASC 718 requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award the requisite service period (usually the vesting period). No compensation costs are recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The Company recorded stock-based compensation to employees of $179,634 and $269,882 during the years ended June 30, 2014 and 2013, respectively.

Net Loss per Common Share

The Company has adopted the provisions of FASB ASC Topic 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.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, which requires accounting for deferred income taxes under the asset and liability method. Deferred income tax asset and liabilities are computed for difference between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.

F-8

The determination of the Company’s provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the consolidated financial statements as appropriate.

In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce stockholders’ equity. This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better consolidated financial statement comparability among different entities. Management’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. Generally, the tax filings are no longer subject to income tax examinations by major taxing authorities for years ended before June 30, 2010. Any potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, state and local tax laws. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

Reclassifications

Certain reclassifications have been made to the 2013 consolidated financial statements to conform to the June 30, 2014 presentation.

Recently Adopted Accounting Pronouncements

The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its financial position, results of operations or cash flows.

Note 2—Going concern

The accompanying consolidated financial statements have been prepared on the basis of accounting principles applicable to a “going concern,” which assumes that 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 raise substantial doubt as to the Company’s ability to continue as a “going concern.” The Company has incurred net losses of $9,284,876 for the period from June 21, 2007 (inception) to June 30, 2014, has an accumulated deficit and a working capital deficit as of June 30 2014, 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.”

F-9

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.

Note 3—Commitments

On January 1, 2013, the Company entered into a 3 year consulting agreement. Pursuant to the terms of the agreement, the Company committed to issue 175,000 common shares to the consultant upon execution of the agreement (see Note 5) and the Company committed to paying a cash commission equal to 8% of the gross sales of all merchandise and scrap products shipped and sold under any contract arranged by the consultant over the term of the agreement.

On February 19, 2013, the Company entered into a lease agreement beginning March 1, 2013 to rent the property at 6 Alder Drive East Syracuse, New York 13057. The monthly rent under the agreement is $8,000, along with property taxes, utilities and waste management incurred by the Company in the use of the facility. The initial term of the lease agreement is 5 years. As of June 30, 2014 the Company owes $128,000 in rent and $59,012 in property tax, under this lease.

On November 1, 2013, the Company entered into an agreement with a structuring agent wherein compensation will be 4,000,000 common shares. Of these shares, 1,000,000 are earned upon execution of the agreement and the remaining 3,000,000 are earned in 1,000,000 share tranches when certain performance objectives are met (see Note 5).

Note 4—Related party transactions

During the year ended June 30, 2014, the Company issued Infanto Holdings LLC, whose principal stockholder Joseph C. Passalaqua is also an officer and principal stockholder of Highlight Networks, Inc., 10,000,000 shares of common stock for consulting services valued at $6,270,000.

F-10

During the years ended June 30, 2014 and 2013, the Company borrowed an aggregate of $202,295 and $161,330, respectively from related parties Friction & Heat LLC and Joseph C. Passalaqua. Joseph C. Passalaqua is a managing member of Friction & Heat. The Company also repaid an aggregate of $40,498 and $0, respectively on the related party debt. The outstanding related party debt is held in unsecured promissory notes, bears interest at 10% per annum and matures between on demand and June 30, 2015. As of June 30, 2014 and 2013, the aggregate unpaid principal on these related party notes was $323,027 and $161,230, respectively, with interest accrued of $22,176 and $3,183, respectively.

In 2013 and 2014, the Company incurred liabilities for unpaid rent at $8,000 monthly to Remix Ventures, LLC, according to a signed rental agreement. Joseph C. Passalaqua the sole managing member of Remix Ventures, LLC and an officer of Highlight Networks, Inc. As of June 30, 2014 and 2013, the amount due for rent was $128,000 and $32,000, respectively.

In 2013 and 2014, the Company incurred liabilities for the reimbursement of property taxes that were paid by Remix Ventures, LLC, according to a signed rental agreement. Joseph C. Passalaqua is the sole managing member of Remix Ventures, LLC and an officer of Highlight Networks, Inc. As of June 30, 2014 and 2013, the amount due in property tax reimbursement to Remix Ventures LLC was $42,165 and $0, respectively.

Note 5— Equity

The Company is authorized to issue 150,000,000 shares of common stock, with par value of $0.001 per share.

On April 17, 2013, the Company issued 175,000 shares of common stock to a nonemployee for consulting services valued at $262,500.

On April 15, 2013, the Company granted an aggregate of 300,000 common shares to officers of the Company for services to be rendered. 150,000 shares vested immediately on April 15, 2013 and 150,000 shares vest on May 1, 2014. The shares were valued at $449,516 of which $269,882 was recognized during the year ended June 30, 2013 and $179,634 were recognized during the year ended June 30, 2014.

The fair value of the remaining 3,000,000 shares was determined to be $930,000 and it is being recognized over the expected successful completion date of the performance conditions of September 30, 2014. During the year ended June 30, 2014, $673,063 was recognized as expense for the 3,000,000 shares and $256,937 will be recognized through the expected completion date of the performance conditions.

F-11

On March 13, 2014, the company issued 225,000 common shares under a consulting agreement. The shares were fully earned upon execution of the agreement. The Company recognized the full fair value of the 225,000 shares of $56,250, based upon the closing price of our common stock of $0.25 on March 13, 2014, during the year ended June 30, 2014.

As of June 30, 2014 and 2013, there were 14,167,600 and 2,894,600 shares of common stock issued and outstanding, respectively.

Note 6—Income taxes

The Company had no income tax expense (benefit) for the years ended June 30, 2014 and 2013. At June 30, 2014, the Company’s accumulated net operating loss carry-forwards for federal and state income purposes was approximately $872,000. These losses are available for future years and expire through June 2032. Utilization of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue Code Section 382.

At June 30, 2014 and 2013, the Company had deferred tax assets of approximately $305,200 and $104,000, respectively, principally arising from net operating loss carryforwards for income tax purposes. The Company has determined it more likely than not that these timing differences will not materialize and provided a full valuation allowance against all of the deferred tax assets.

Note 7—Subsequent events

In July, August and September 2014, an additional $24,200 was loaned to the Company from a related party. The principal amount of $24,200 is held in promissory notes that are unsecured, bear simple interest at 10% per annum and are payable upon demand.

F-12

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 and are not effective

On June 30, 2014, Our Chief Executive Officer and Chief Financial Officer 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.

The material weaknesses identified relates to the following:

Lack of proper segregation of duties

Lack of a formal control process that provides for multiple levels of supervision and review

The Company believes that the material weaknesses are due to the Company’s limited resources.

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 as of June 30, 2014 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.

As of June 30, 2014, management conducted an evaluation of the effectiveness of our internal control over financial reporting and found it to be not effective. 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 do not have proper segregation of duties due to our 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, MaloneBailey, LLP, has not conducted an audit of our controls and procedures regarding internal control over financial reporting. Consequently, MaloneBailey, LLP 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.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

In 2012, Anthony E. Lombardo resigned as the Company’s President, Chief Executive Officer, and Director of the Company and Damion D. Glushko resigned as Secretary, Chief Financial Officer, and Director of the Company. Alfonso Knoll was appointed as President, Chief Executive Officer and Director of the Company and Joseph C. Passalaqua was appointed Secretary, Chief Financial Officer and Director of the Company.

In 2013, Alfonso Knoll was appointed President and Director and Joseph Passalaqua was appointed Secretary and Director of EZRecycling, Inc., the newly formed, wholly owned subsidiary of Highlight Networks. Danny Mendelson was appointed CEO of EZRecycling, Inc.

In 2013, Richard Weaver and Danny Mendelson were both appointed as Vice Presidents of Highlight Networks. And Danny Mendelson was appointed CEO of EZRecycling, Inc., the newly formed, wholly owned subsidiary of Highlight Networks.

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

(a)

Resignation of Directors and Officers

During 2012, Anthony E. Lombardo resigned as the Company’s President, Chief Executive Officer, and Director of the Company and Damion D. Glushko resigned as Secretary, Chief Financial Officer, and Director of the Company. The resignations are not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

During 2014, Richard Weaver and Danny Mendelson both resigned as Vice Presidents and Directors of the Company. Danny Mendelson also resigned as CEO of EZRecycling, Inc., the wholly owned subsidiary of Highlight Networks, Inc. The resignations are 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

During 2013 and 2014, the following persons were appointed as our officers and directors.

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

Alfonso Knoll, CEO, President, and Director

Alfonso C. Knoll has been President of Terra Silex Holdings, LLC, a private venture capital firm since December 2001. He was acting CEO of Mountain Top Properties, Inc., a company engaged in the business of Real Estate Investment and Management from December 2006 to December 2011. He has been president of Bullfly Trading Company, Inc. since December 2005. Mr. Knoll was CEO and president of Endeavor Power Corp., Inc. from November 2010 to May 2011 and Rock Ridge Resources, Inc. since May 2012. Mr. Knoll is a graduate of Wesley College and has attended Franklin and Marshall College and Widener University School of Law. Mr. Knoll is also currently President and Director of EZRecycling, Inc., the wholly owned subsidiary of Highlight Networks.

Mr. Knoll does not have a family relationship with any of the officers or directors of the Company and there are no compensation arrangements or any related party transactions to disclose.

Joseph C. Passalaqua, CFO, Secretary, and Director

Mr. Passalaqua has been the president and a director of Biolog, Inc. on February 21, 2011. He was the president, treasurer and a director of Hardwired Interactive, Inc. from October 2010 to November 2011. He was the secretary and director of Pegasus Tel, Inc. from July 2010 until March 2011 and January 2012 to March 2012. He became president and a director of Plantation Lifecare Developers, Inc. in February 2009. He was the Secretary of Digital Utilities Ventures, Inc. from March 2009 through July 2010. Previously, Mr. Passalaqua owned Laqua’s Chevrolet franchise and Laqua’s 481 Pontiac, Buick, GMC Truck Center dealerships until July 2008. Mr. Passalaqua is also currently Secretary and Director of EZRecycling, Inc., the wholly owned subsidiary of Highlight Networks.

Mr. Passalaqua does not have a family relationship with any of the officers or directors of the Company and there are no compensation arrangements or any related party transactions to disclose.

Executive Compensation

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

Employment Agreements

We have entered into an employment agreement with both of our two officers 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.

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth, for the fiscal years indicated, all compensation awarded to, earned by or paid to the all executive officers of the Company as of June 30, 2014 and June 30, 2013. 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
Current Officers:
Alfonso Knoll President/CEO/Director	2013-2014	-0-	-0-	-0-	-0-	-0-

Joseph C. Passalaqua Secretary/CFO/Director	2013-2014	-0-	-0-	-0-	-0-	-0-
Former Officers:
Danny Mendelson Vice President	2013-2014	-0-	-0-	-0-	-0-	-0-

Richard Weaver Vice President	2013-2014	-0-	-0-	-0-	-0-	-0-

Anthony E. Lombardo
President/Director/CEO	2011-2012	-0-	-0-	-0-	-0-	-0-

Damion D. Glushko
Secretary/Director/CFO	2011-2012	-0-	-0-	-0-	-0-	-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, 2014 or for the previous year ended June 30, 2013.

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, 2014 and the same period ending June 30, 2013.

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.

During 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. Anthony E. Lombardo was appointed as Director, President and Chief Executive Officer, and Damion D. Glushko was appointed as Director and Secretary.

The following two tables presents certain information regarding beneficial ownership of our common stock for the years ended June 30, 2013 and June 30, 2014 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 show.

The following table presents certain information regarding beneficial ownership of our common stock as of

June 30, 2013:

	Shares		Percent of
	Beneficially		Total Shares
Name of Beneficial Owner	Owned		Outstanding


Alfonso Knoll President, CEO, Director		-0-		0%
Infanto Holdings Corp.
Joseph C. Passalaqua Secretary, CFO, Director		2,000,000		69%

Richard Weaver Vice President		150,000		6%

Danny Mendelson Vice President		150,000		6%

Officers and Directors as a Group		2,300,000		81%

*2,894,600 shares of outstanding common stock as of June 30, 2013

The following table presents certain information regarding beneficial ownership of our common stock as of

June 30, 2014:

	Shares		Percent of
	Beneficially		Total Shares
Name of Beneficial Owner	Owned		Outstanding


Alfonso Knoll President; CEO; Director		-0-		0%
Infanto Holdings Corp.
Joseph C. Passalaqua Secretary; CFO; Director		12,000,000		85%

Officers and Directors as a Group		12,000,000		85%

*14,167,600 shares of outstanding common stock as of June 30, 2014

The address of the Company is 7325 Oswego Road Liverpool, New York 13090.

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, 2011. Infanto paid a total of $50,000 to selling shareholders.

During 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. Anthony E. Lombardo was appointed as President, Chief Executive Officer, and Director and Damion D. Glushko was appointed as Secretary and Director.

During 2012, Anthony E. Lombardo resigned as the Company’s President, Chief Executive Officer, and Director of the Company and Damion D. Glushko resigned as Secretary, Chief Financial Officer, and Director of the Company. Alfonso Knoll was appointed as President, Chief Executive Officer and Director of the Company and Joseph C. Passalaqua was appointed Secretary, Chief Financial Officer and Director of the Company.

During 2013, Richard Weaver and Danny Mendelson were both appointed as Vice Presidents of Highlight Networks, Inc.

During 2014, Richard Weaver and Danny Mendelson both resigned as Vice Presidents and Directors of Highlight Networks, Inc. Danny Mendelson also resigned as CEO of EZRecycling, Inc., the wholly owned subsidiary of Highlight Networks, Inc.

None of the following parties has, since commencement of our fiscal years ended June 30, 2013 and June 30, 2012, 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, Alfonso Knoll and Joseph Passalaqua, 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 FEES AND SERVICES

(1) Audit Fees: The Company’s current principal accounting firm, MaloneBailey LLP has billed $4,500 for Audit services for the year ended June 30, 2013 and $5,000 for Audit services for the year ended June 30, 2014.

(2) Audit Related Fees: None

(3) Tax Fees: None

(4) All Other Fees: None

PART IV

ITEM 15. EXHIBITS

EXHIBIT 31.1 Highlight Networks, Inc. Certification of Chief Executive Officer Pursuant to Section 302.

EXHIBIT 31.2 Highlight Networks, Inc. Certification of Chief Financial Officer Pursuant to Section 302.

EXHIBIT 32.1 Highlight Networks, Inc. Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EXHIBIT 32.2 Highlight Networks, Inc. Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101* Interactive Data Files for Highlight Networks, Inc. 10K for the Year Ended June 30, 2014

101.INS* XBRL Instance Document

101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

*Pursuant to Rule 406T of Regulation S-T, these interactive date files are deemed not filed or part of the registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

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: September 22, 2014

by: /s/ Alfonso Knoll

Alfonso Knoll

President; Chief Executive Officer and Director

by: /s/ Joseph C. Passalaqua

Joseph C. Passalaqua

Secretary; Chief Financial Officer and Director

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/ Alfonso Knoll

Alfonso Knoll

President; Chief Executive Officer and Director

(Principal Executive Officer)

by: /s/ Joseph C. Passalaqua

Joseph C. Passalaqua

Secretary; Chief Financial Officer and Director

(Principal Financial Officer)

Alfonso Knoll

President, Chief Executive Officer and Director

Joseph C. Passalaqua

Secretary; Chief Financial Officer and Director

Danny Mendelson

Vice President (Resigned )

Richard Weaver

Vice President (Resigned )