SOLLENSYS CORP. - Quarter Report: 2020 June (Form 10-Q)

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

☐  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ________________ TO ________________________.

Commission File Number 333-174581

Sollensys Corp.

(Exact name of registrant as specified in its charter)

1185 Avenue of the Americas, 3^rd Floor

New York, New York 10036

(Address of principal executive offices)

1-(646)-768-8417

(Issuer’s Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐   No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to 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 such files). Yes ☐ No þ

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not 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. þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. þ

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

As of July 14, 2020, the Registrant had 502,075,402 shares of Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE - None

TABLE OF CONTENTS

PART I.

FINANCIAL INFORMATION

SOLLENSYS CORP.

(Unaudited) Balance Sheets

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

SOLLENSYS CORP.

(Unaudited) Statements of Operations

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

SOLLENSYS CORP.

(Unaudited) Statements of Changes in Stockholder’s Equity

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

SOLLENSYS CORP.

(Unaudited) Statements of Cash Flows

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

SOLLENSYS CORP.

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 10,000,000 shares of Series A Preferred Stock (“Series A”). Among other rights, the holders of Series A preferred shares shall have the right to convert each share of Series A into one share of common stock at a conversion price of $0.0002. There were no Series A shares issued and outstanding as of 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 – 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.

As used in this Form 10-Q, references to “Sollensys”,” the “Company,” “we,” “our” or “us” refer to Sollensys Corp. and subsidiaries unless the context otherwise indicates.

Forward-Looking Statements

The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws.

Plan of Operation

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 included organization and incorporation, target market identification, marketing plans, and capital formation. A substantial portion of the Company’s efforts were involved in 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 under 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 has 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 financial statement presentation

OVERVIEW AND HISTORY

We had intended to become a health-related online directory, linking over fifty advertisers who provide various medical services. This online portal would generate a commission on everything sold based on its products and services It was intended to provide the following services:

Business Strategy and Objectives

Our automated online health directory was intended to allow customers to advertise through the Company’s website while keeping track of all sales generated through our directory.  

CURRENT PLAN OF OPERATION

We have been dormant since September 2013. As of the date of this Report, we intend to engage in what we believe to be synergistic acquisitions or joint ventures with a company or companies that we believe will enhance our business plan. There are no assurances we will be able to consummate any acquisitions using our securities as consideration, or at all. Numerous things will need to occur to allow us to implement this aspect of our business plan and there are no assurances that any of these developments will occur, or if they do occur, that we will be successful in fully implementing our plan.

Management will seek out and evaluate businesses for acquisition. The integrity and reputation of any potential acquisition candidate will first be thoroughly reviewed to ensure it meets with management’s standards. Once targeted as a potential acquisition candidate, we will enter into negotiations with the potential candidate and commence due diligence evaluation, including its financial statements, cash flow, debt, location and other material aspects of the candidate’s business. If we are successful in our attempts to acquire a company or companies utilizing our securities as part or all of the consideration to be paid, our current shareholders will incur dilution.

In implementing a structure for a particular acquisition, we may become a party to a merger, consolidation, reorganization, joint venture, asset purchase, or licensing agreement with another corporation or entity. We may also acquire stock or assets of an existing business. Upon the consummation of a transaction, likely, our present interim management and shareholders will no longer be in control of our Company.

We will participate in an acquisition only after the negotiation and execution of appropriate written agreements. Although the terms of such agreements cannot be predicted, generally such agreements will require some specific representations and warranties by all of the parties thereto, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by each of the parties before and after such closing, will outline the manner of bearing costs, including costs associated with our attorneys and accountants, will set forth remedies on default and will include miscellaneous other terms.

We believe there are certain perceived benefits to being a public company whose securities are publicly traded, including the following:

There are also certain perceived disadvantages to being a trading company including the following:

Business entities, if any, which may be interested in a combination with us may include the following:

A business combination with a private company will normally involve the transfer to the private company of the majority of the issued and outstanding common stock of the Company. and the substitution by the private company of its own management and board of directors.

The proposed business activities described herein classify us as a “shell” company. The Securities and Exchange Commission and certain states have enacted statutes, rules, and regulations regarding the sales of securities of shell companies, as well as limitations on a shareholder’s ability to sell their “restricted” securities. Rule 144 is not available to a shareholder of a shell company unless and until the Company files a registration statement with the SEC that includes certain specific information about existing business operations of a registrant and thereafter must wait an additional one year to take advantage of that exemption from registration.

Rule 12b-2 of the 34 Act defines a shell company as a company that has:

We will continue to file all reports required of us under the Exchange Act until a business combination has occurred, or we organically build our business from the cash raised from investors. A business combination will normally result in a change in the control and management of our Company. Since a principal benefit of a business combination with us would normally be considered our status as a reporting company, it is anticipated that we will continue to file reports under the Exchange Act following a business combination. No assurance can be given that this will occur or, if it does, for how long.

Critical Accounting Policies and Estimates

Critical accounting estimates – The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable 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. Actual results may differ from these estimates under different assumptions or conditions.

Stock-based Compensation – We account 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.

Recent Accounting Pronouncements

On January 1, 2018, we 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 June 30, 2018, our financial statements were not materially impacted as a result of the application of Topic 606 compared to Topic 605.

Results of Operations

The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this Report and any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, concerning future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.

The Company is currently dormant. See Plan of Operation in Item 1

GOING CONCERN

Our financial statements accompanying this Report have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. We have a minimal operating history and minimal revenues or earnings from operations. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues for the immediate future. See “Part II, Item 8, Financial Statements and Supplementary Data.”

LIQUIDITY AND CAPITAL RESOURCES

We have no revenue-producing operations or other sources of income as of the date of this Report, nor have we had any revenue since inception. See “Plan of Operation” above herein for an explanation of our current business activities.

It is our current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to us. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by us to successfully implement these plans would have a material adverse effect on our business, including the possible inability to continue operations.

All funds to maintain operations has been provided by our Court-appointed custodian.

Contractual Obligations

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

As a smaller company, we are not required to provide the information required by this item.

Evaluation of Disclosure Controls and Procedures

Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Based on that evaluation, as of June 30, 2020, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes that have affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period covered by this report. 

PART II. OTHER INFORMATION

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

As a smaller reporting company, we are not required to provide the information required by this item.

Unregistered Sales of Equity Securities

None.

Purchases of equity securities by the issuer and affiliated purchasers

None.

Use of Proceeds

None

None.

Not applicable.

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunder duly authorized.

In accordance with the Exchange Act, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on July 15, 2020.

17