The accompanying notes are an integral part
of the consolidated financial statements.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2020
AND JUNE 30, 2019
NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Sollensys
Corp. (“Sollensys” or the “Company”), was formerly a development stage company, incorporated on September
29, 2010, under the laws of the State of Nevada. Initial plans included organization and incorporation, target market identification,
marketing plans, and capital formation. A substantial portion of the Company’s efforts involved developing a business plan
and establishing contacts and visibility in the marketplace. The Company has not generated any revenues since inception. Effective
July 30, 2012, the holder of 3,000,000 shares, or approximately 79.8% of Sollensys Corporation, (the “Company”) then
outstanding voting securities, executed a written consent in accordance with Section 78.320 of the NRS, approving the amendment
to the Articles of Incorporation to change the Company’s name to Sollensys Corp. and increase the common shares authorized
to 1,500,000,000 and increase the preferred shares authorized to 25,000,000, and to split each outstanding share of common stock
into 131.69 shares of common stock.
The
Company had been dormant since September 30, 2012.
On
December 27, 2019, the Eighth Judicial District Court of Clark County Nevada, pursuant to Case number A-19-805633-B appointed
Custodian Ventures, LLC as the custodian of Sollensys Corp. David Lazar, who controls Custodian Ventures was subsequently named
the only interim officer and director of the Company and is considered a related party for the purpose financial statement presentation.
On
June 16, 2020, Custodian Ventures filed a motion with the Eighth Judicial District Court of Clark County, Nevada to move the
court for an order concluding and terminating the custodianship of the Company.
The
Company’s accounting year-end is March 31.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”)
“FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements
in conformity with generally accepted accounting principles (“GAAP”) in the United States.
Management’s
Representation of Interim Financial Statements
The
accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules
and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included
in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)
have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate
to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which
in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments
are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated
financial statements should be read in conjunction with the audited consolidated financial statements at March 31, 2020, and 2019,
as presented in the Company’s Annual Report on Form 10-K filed on April 29, 2020, with the SEC.
Going
Concern
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following
the date of these financial statements. The Company has incurred significant operating losses since inception. As of June 30,
2020, the Company had a working capital deficit of $38,518 and negative shareholders’ equity of $38,518.
Because
the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this
raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to
raise additional funds and is currently exploring alternative sources of financing. Historically, the Company has raised capital
through private placements, as an interim measure to finance working capital needs and may continue to raise additional capital
through the sale of common stock or other securities and obtaining some short-term loans. The Company will be required to continue
to so until its operations become profitable. Also, the Company has, in the past, paid for consulting services with its common
stock to maximize working capital, and intends to continue this practice where feasible.
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amount of expenses during the reporting period. The most significant estimates relate to income taxes and contingencies.
The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed
to be reasonable given the quality of information available as of the date of these financial statements. The results of these
assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. Actual results could differ from these estimates.
Revenue
Recognition
We
have not generated any revenue since inception.
On
January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with
Customers (“ASC 606”). Results for reporting periods beginning after January 1, 2018, are presented under ASC 606. As
of and for the year ended March 31, 2020, the financial statements were not materially impacted as a result of the application
of Topic 606 compared to Topic 605.
Cash
and cash equivalents
The
Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.
On June 30, 2020, and March 31, 2020, the Company’s cash equivalents totaled $0 and $0 respectively.
Income
taxes
The
Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement 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. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for
Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement
recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized,
a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The
amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate
settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions quarterly to determine if facts
or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability
under audit.
Stock-based
Compensation
The
Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of
the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public 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 cost
is recognized for equity instruments for which employees do not render the requisite service.
Net
Loss per Share
Net
loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as
defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share.” Basic earnings per common share (“EPS”)
calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during
the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number
of common shares and dilutive common share equivalents outstanding.
Recent
Accounting Pronouncements
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model
for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating
leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and
interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB
issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB
issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU
2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease
standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective
date and transition requirements as the new lease standard.
We
adopted ASC 842 on January 1, 2019. The adoption of this guidance did not have any impact on our financial statements.
NOTE
3 – LOANS PAYABLE RELATED PARTY
As
of June 30, 2020, and March 31, 2020, the balances of loans payable related party were $38,518 and $26,100 respectively. These
balances reflect operating expenses of the Company which have been funded by the Company’s Court-appointed custodian in
the form of interest-free demand loans.
NOTE
4 – ACCRUED EXPENSES AND ADVANCE FORM STOCKHOLDERS
As of June 30, 2020, the balances of “accrued
expenses” and “advance from stockholder” were $-0- and $-0-, respectively, compared to $31,429 and $54,342, respectively,
at March 31, 2020. During the three months ended June 30, 2020, the Company determined that the statute of limitations per Nevada
law for any claims to be made relating to liabilities that had been recorded on the Company’s books and records dating back
to 2013 and prior. As a result, the Company determined it no longer had any liability for accrued expenses or an advance to shareholder
and recorded “other income” as a gain on the extinguishment of debt of $85,771 on its statements of operations for
the period ended June 30, 2020.
NOTE
5 – STOCKHOLDERS EQUITY
Preferred
Stock Series A
On March 21, 2020, the Company filed a
Certificate of Designation to authorize 25,000,000 shares of Series A Preferred Stock (“Series A”) at a par value of
$0.001. Among other rights, the holders of Series A preferred shares shall have the right to convert each share of Series A into
50 shares of common stock. On April 1, 2020 we issued 19,000,000 shares of Series A preferred stock to the Company’s Chief
Executive Officer, David Lazar. Therefore, these preferred shares can be converted to 950,000,000 shares of common stock. As a
result of this issuance, the Company recorded stock based compensation of $1,900,000 for the three-month period ended June 30, 2020.
Common
Stock
The
Company has authorized 1,500,000,000 shares of $0.001 common stock. As of June 30, 2020, and March 31, 2020, respectively, there
were 502,075,402 shares issued and outstanding.
NOTE
6 – COMMITMENTS AND CONTINGENCIES
The
Company did not have any contractual commitments as of June 30, 2020, and March 31, 2020
NOTE 7 – RESTATEMENT
The Company’s previously filed financial
statements did not include the impact of the issuance of 19,000,000 preferred shares to the Company’s CEO. The chart below
reflects the impact of this omission on the Company’s Balance Sheet, Statement of Operations and on the Statements of Cash
Flows :
SOLLENSYS CORP.
(Unaudited) Balance Sheets
|
|
As Filed
|
|
|
As Restated
|
|
|
Difference
|
|
|
|
6/30/2020
|
|
|
6/30/2020
|
|
|
6/30/2020
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Advance from stockholder
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loans payable related party
|
|
|
38,518
|
|
|
|
38,518
|
|
|
|
-
|
|
Total current liabilities
|
|
|
38,518
|
|
|
|
38,518
|
|
|
|
-
|
|
Total liabilities
|
|
|
38,518
|
|
|
|
38,518
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, Series A, $0.001 par value, 25,000,000 shares authorized, 19,000,000 and -0- shares issued and outstanding as of June 30, 2020 and March 31, 2020, respectively
|
|
|
-
|
|
|
|
1,900,000
|
|
|
|
1,900,000
|
|
Common stock, $0.0001 par value, 1,500,000,000 shares authorized; 502,075,402 issued and outstanding as of June 30, 2020 and March 31, 2020, respectively
|
|
|
502,075
|
|
|
|
502,075
|
|
|
|
-
|
|
Retained earnings deficit
|
|
|
(540,593
|
)
|
|
|
(2,440,593
|
)
|
|
|
(1,900,000
|
)
|
Total stockholders’
equity (deficit)
|
|
|
(38,518
|
)
|
|
|
(38,518
|
)
|
|
|
-
|
|
Total liabilities and equity
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
SOLLENSYS CORP.
(Unaudited) Statements of Operations
|
|
As Filed
|
|
|
As Restated
|
|
|
Difference
|
|
|
|
6/30/2020
|
|
|
6/30/2020
|
|
|
6/30/2020
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative -related party
|
|
$
|
12,418
|
|
|
$
|
12,418
|
|
|
$
|
-
|
|
Compensation related party
|
|
|
-
|
|
|
|
1,900,000
|
|
|
|
1,900,000
|
|
Total operating expenses
|
|
|
12,418
|
|
|
|
1,912,418
|
|
|
|
1,900,000
|
|
Income loss from operations
|
|
|
(12,418
|
)
|
|
|
(1,912,418
|
)
|
|
|
(1,900,000
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on the extinguishment of debt
|
|
|
85,771
|
|
|
|
85,771
|
|
|
|
-
|
|
Total other income (expense)
|
|
|
85,771
|
|
|
|
85,771
|
|
|
|
-
|
|
Income (loss) before income taxes
|
|
|
73,353
|
|
|
|
(1,826,647
|
)
|
|
|
(1,900,000
|
)
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net income (loss)
|
|
$
|
73,353
|
|
|
|
(1,826,647
|
)
|
|
|
(1,900,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per common share
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
502,075,402
|
|
|
|
502,075,402
|
|
|
|
-
|
|
SOLLENSYS CORP.
(Unaudited) Statements of Cash Flows
|
|
As Filed
|
|
|
As Restated
|
|
|
Difference
|
|
|
|
6/30/2020
|
|
|
6/30/2020
|
|
|
6/30/2020
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities of continuing operations:
|
|
|
|
|
|
|
|
|
|
Net profit (loss)
|
|
$
|
73,353
|
|
|
$
|
(1,826,647
|
)
|
|
$
|
(1,900,000
|
)
|
Stock-based compensation, related party
|
|
|
-
|
|
|
|
1,900,000
|
|
|
|
1,900,000
|
|
Adjustments to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on the extinguishment of debt
|
|
|
(85,771
|
)
|
|
|
(85,771
|
)
|
|
|
-
|
|
Net cash (used in) operating activities
|
|
|
(12,418
|
)
|
|
|
(12,418
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party loan
|
|
|
12,418
|
|
|
|
12,418
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
12,418
|
|
|
|
12,418
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cash and cash equivalents at beginning of period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cash and cash equivalents at end of period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
8 – SUBSEQUENT EVENTS
In
accordance with ASC 855-10 management has evaluated subsequent events from June 30, 2020, through the date the financial
statements were available to be issued and has determined that there are no items requiring disclosure.