Notes to the Condensed Financial Statements
(Unaudited)
Note 1 - Organization and Operations
Sollensys Corp. (fka Health Directory, Inc. or the Company), a development stage company, was incorporated on September 29, 2010 under the laws of the State of Nevada. Initial operations have included organization and incorporation, target market identification, marketing plans, and capital formation. A substantial portion of the Companys activities has 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 Companys 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. All share and per share amounts have been restated to give effect to the stock split. The Companys name was changed in anticipation of merging with Sollensys Corporation - a South Korean corporation.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (SEC) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. The Balance Sheet at March 31, 2012 has been derived from the audited financial statements. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the year ended March 31, 2012 and notes thereto contained in the Companys Annual Report on Form 10-K filed with the SEC on June 28, 2012.
Development Stage Company
The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. The Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses during the reporting period.
F-5
SOLLENSYS CORP.
(Formerly known as Health Directory, Inc.)
(A Development Stage Company)
September 30, 2012 and 2011
Notes to the Condensed Financial Statements
(Unaudited)
The Companys significant estimates and assumptions include the fair value of financial instruments and the assumption that the Company will be a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (Paragraph 820-10-35-37) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
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Level 1
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Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
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Level 2
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Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
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Level 3
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Pricing inputs that are generally unobservable inputs and not corroborated by market data.
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Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Companys financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity of these instruments.
F-6
SOLLENSYS CORP.
(Formerly known as Health Directory, Inc.)
(A Development Stage Company)
September 30, 2012 and 2011
Notes to the Condensed Financial Statements
(Unaudited)
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
It is not, however, practical to determine the fair value of advances from stockholders due to their related party nature.
Income Taxes Provision
The Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13.addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In managements opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the period ended September 30, 2012.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
There were no potentially outstanding dilutive shares for the three and six months ended September 30, 2012 or 2011.
F-7
SOLLENSYS CORP.
(Formerly known as Health Directory, Inc.)
(A Development Stage Company)
September 30, 2012 and 2011
Notes to the Condensed Financial Statements
(Unaudited)
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Note 3 - Going Concern
The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying condensed financial statements, the Company had a deficit accumulated during the development stage at September 30, 2012, and a net loss and net cash used in operating activities for the fiscal year then ended, respectively, with no revenues earned since inception. These factors raise substantial doubt about the Companys ability to continue as a going concern.
While the Company is attempting to commence operations and generate revenues, the Companys cash position may not be significant enough to support the Companys daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Companys ability to further implement its business plan and generate revenues.
The condensed financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 - Related Party Transactions and Employment Agreement
Free Office Space
The Company has been provided office space by its Chief Executive Officer at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its financial statement.
Employment Agreement
The Company entered into an employment agreement (Employment Agreement) with its president and chief executive officer (Employee) commencing May 1, 2011, which requires that the Employee be paid a minimum of $500 per month for three (3) years from date of signing. Either the employee or the Company has the right to terminate the Employment Agreement upon thirty (30) days notice to the other party. This agreement was terminated on July 18, 2012.
Pursuant to the Employment Agreement the Company recorded $1,500 and $2,500 for the six months ended September 30, 2012 and 2011, respectively.
F-8
SOLLENSYS CORP.
(Formerly known as Health Directory, Inc.)
(A Development Stage Company)
September 30, 2012 and 2011
Notes to the Condensed Financial Statements
(Unaudited)
Advances from Stockholder
From time to time, stockholder of the Company advances funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.
Advances from stockholder at September 30, 2012 and March 31, 2012, consisted of the following:
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September 30, 2012
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March 31, 2012
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Advances from stockholder
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$
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54,342
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$
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-
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Total
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$
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54,342
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$
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-
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Note 5 - Stockholders Equity
Shares Authorized
The total number of shares of all classes of stock which the Company is authorized to issue is 1,525,000,000 shares of which 25,000,000 shares shall be Preferred Stock, par value $0.001 per share, and 1,500,000,000 shares shall be Common Stock, par value $0.001 per share.
Common Stock
On September 29, 2010, the Company issued 263,380,000 common shares to its Chief Executive Officer at the par value of $0.000008 per share or $2,000 for compensation upon formation of the Company.
For the period from December 1, 2010 through December 31, 2010, the Company sold 33,185,880 shares of its common stock at $0.00038 per share or $12,600 in aggregate to 10 individuals.
For the period from January 1, 2011 through March 31, 2011, the Company sold 66,819,506 shares of its common stock at $0.00038 per share or $25,370 in aggregate to 25 individuals.
On December 1, 2011, the Company issued 131,690,000 common shares to its Chief Executive Officer at $0.00038 per share or $50,000 for compensation.
On July 18, 2012, in a private transaction, 3,000,000 shares of common stock, which represented 79.8% of the issued and outstanding shares of common stock, were sold to Middle East Ventures FZE for the total price of $25,000. This resulted in a change in control of the Company. In connection with this transaction, also on July 18, 2012, Humaira Haider resigned from her position as Chief Executive Officer of the Company and Rowland W. Day was appointed as the new President and sole director of the Company as well as Chief Executive Officer of the Company, Secretary, and Chief Financial Officer.
On July 30, 2012, the Company effectuated a forward 131.69-to-1 stock split of common shares.
On September 4, 2012, the Company issued 5,000,000 shares of restricted common stock to its officer at $0.001 per share or $5,000 for services.
F-9
SOLLENSYS CORP.
(Formerly known as Health Directory, Inc.)
(A Development Stage Company)
September 30, 2012 and 2011
Notes to the Condensed Financial Statements
(Unaudited)
Payments Received from Stock Subscription Receivable
On April 6, 2011, April 7, 2011 and April 13, 2011, payments of $13,070 in the aggregate were received from the sale of 261,400 of the 759,400 shares sold from December 1, 2010 through March 31, 2011. Since these payments were received prior to the issuance of these financial statements, they were reflected as an asset on the balance sheet as of March 31, 2011.
Capital Contribution
In October 2010, the Companys Chief Executive Officer contributed $100 for the general working capital to the Company.
On July 24, 2012, $27,989 in advance from shareholder were converted to capital and recorded as contribution to paid-in capital.
Note 6 - Share Acquisition Agreement
On September 30, 2012 a Share Acquisition Agreement (Agreement) was entered into for the acquisition of all of the outstanding shares of Sollensys Corporation, a South Korean Corporation (Sollensys Korea) by the Registrant. Pursuant to the Agreement, the Registrant intends to acquire all of the outstanding shares of Sollensys Korea by issuing approximately 200,000,000 million shares of the Registrants common stock. Upon issuance of the 200,000,000 common shares, the shareholders of Sollensys Korea will own approximately 40% of the Registrant. The closing of the Agreement is subject to the audit of Sollensys Koreas financial statements for the past two fiscal years, approval by the shareholders of Sollensys Korea and other standard terms and conditions. The parties intend to close the transaction by approximately December 2012.
F-10