U.S. UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,Washington, D.C. 20549

FORM 10-Q/A10-Q

(Mark one)

þ☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1933

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 20202021

☐   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.

Sollensys Corp

(Exact name of registrant as specified in its charter)

1185 Avenue of the Americas, 3^rd Floor2475 Palm Bay Road NE, Suite 120

New York, New York 10036Palm Bay, Florida 32905

(Address of principal executive offices) (Zip Code)

1-(646)-768-8417(866)-438-7657

(Issuer’s Telephone Number)Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒     No ☒☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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, a 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 Exchange Act). Yes þ☐     No ☐☒

As of July 14, 2020,August 16, 2021, the Registrantregistrant had 502,075,40299,831,199 shares of Common Stockcommon stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE - None

EXPLANATORY NOTE

Sollensys is filing Amendment No. 1 to its Quarterly Report on Form 10-Q for the three months ended June 30, 2020 (“Amendment No. 1”) to amend its Quarterly Report which was originally filed with the Securities and Exchange Commission (the “SEC”) on July 15, 2020 (the “Original Quarter Report”) to amend and restate its financial statements for the three months ended June 30, 2020. In the Original Quarter Filing, the Company’s financial statements inadvertently failed to include the issuance of 19,000,000 preferred shares to a related party on April 1, 2020.

The purpose of this Amendment No. 1 is to restate the financial statements and to modify and update all other associated disclosures in the Original Quarterly Report. Amendment No. 1 continues to speak as of the date of the Original Quarterly Report, and except as noted above, the Company has not otherwise updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Quarterly Report. Accordingly, Amendment No. 1 should be read in conjunction with the Original Quarterly Report. See Note 7. “Restatement” to the Company’s financial statements

In accordance with applicable SEC rules, this Amendment No. 1 includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, from our Chief Executive Officer and Chief Financial Officer dated as of the filing date of this Amendment No. 1.

TABLE OF CONTENTS

TABLE OF CONTENTS

PART I.

FINANCIAL INFORMATION

SOLLENSYS CORP.

(Unaudited) Balance SheetsPART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SOLLENSYS CORP.

Consolidated Balance Sheets

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

SOLLENSYS CORP.

(Unaudited)Consolidated Statements of Operations

(Unaudited)

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

SOLLENSYS CORP.

(Unaudited) Statements of Changes in Stockholder’sStockholder's Equity

(Unaudited)

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

SOLLENSYS CORP.

(Unaudited)Consolidated Statements of Cash Flows

(Unaudited)

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

SOLLENSYS CORP.CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Sollensys Corp.Corp (“Sollensys” or the “Company”), was formerly a development stage company, incorporated in Nevada on September 29, 2010, under the lawsname Health Directory, Inc.

On November 30, 2020, Sollensys entered into a share exchange agreement (the “Share Exchange Agreement”) with (i) Eagle Lake Laboratories, Inc., a Florida corporation (“Eagle Lake”), (ii) each of the Stateshareholders of Nevada. Initial plans included organizationEagle Lake (the “Eagle Lake Shareholders”), and incorporation, target market identification, marketing plans,(iii) Donald Beavers as the representative of the Eagle Lake Shareholders.

Among other conditions to the closing of the transactions contemplated by the Share Exchange Agreement (the “Closing”), pursuant to the terms of the Share Exchange Agreement, the parties agreed that the Company would acquire 100% of Eagle Lake’s issued and outstanding capital formation. A substantial portionstock, in exchange for the issuance to the Eagle Lake Shareholders of a number of shares of the Company’s efforts involved developingcommon stock, par value $0.001 per share, to be determined at the Closing of the Share Exchange Agreement.

Eagle Lake is a business planFlorida-based science, technology, and establishing contactsengineering solutions corporation offering products that ensure their clients' data integrity through the collection, storage, and visibilitytransmission. The Company expects to generate revenue with Eagle’s innovative flagship product, the Blockchain Archive Server™ that can be utilized to protect client data from ransomware. Blockchain technology is a leading-edge tool for data security, providing an added layer of security against data loss due to malware.

On December 29, 2020, the Company’s Board approved the change in the marketplace. The Company has not generated any revenues since inception. Effective July 30, 2012,Company’s fiscal year-end from March 31 to December 31.

Common Control Accounting Treatment

Sollensys Corp and Eagle Lake were under 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 78.320common control of the NRS, approvingCEO before and after the amendmentdate of transfer. As a result, the Company adopted the guidance in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 805-50-05-5 for the transfer of net assets between entities under common control to apply a method similar to the pooling-of-interests-method. Under the method, the financial statements of the Company shall report results of operations for the period in which the transfer occurs as though the transfer of the net assets had occurred at the beginning of the period. Results of operations for the period will thus comprise both those of the previously separate entities combined from the beginning of the period to the date the transfer is completed and those of the combined operations from that date to the end of the period. Similarly, the Company shall present the statements of financial position and other financial information presented as of the beginning of the period as though the assets and liabilities had been transferred at that date. Financial statements and financial information presented for prior years also shall be retrospectively adjusted to furnish comparative information.

Reverse Stock Split

On October 14, 2020, the Company filed with the Secretary of State of Nevada a Certificate of Amendment to its Articles of Incorporation (the “Amendment”) to changeeffect a 1-for-120 reverse stock split (the “Reverse Split”) of the Company’s nameissued and outstanding common stock. Pursuant to Sollensys Corp.the Amendment, effective as of October 30, 2020, every 120 shares of the issued and increase theoutstanding common shares authorized to 1,500,000,000 and increase the preferred shares authorized to 25,000,000, and to split each outstandingstock will be converted into one share of common stock, into 131.69without any change in the par value per share.

The Reverse Split became effective on November 2, 2020. Following the effectiveness of the Reverse Split, on November 2, 2020, the number of authorized shares of common stock.stock was reduced from 12,000,000,000 shares to 300,000,000. Additionally, following the Reverse Split, Eagle Lake’s 11,400,000,000 common shares were adjusted to 95,000,000 shares and they continued to maintain 95.8% of the total of 99,193,962 common shares outstanding.

The Company had been dormant since September 30, 2012.No fractional shares of common stock were issued in connection with the Reverse Split. If, as a result of the Reverse Split, a shareholder would otherwise hold a fractional share, the shareholder received, instead of the issuance of such fractional share, one whole share of common stock. As a result, 143,585 additional shares were issued due to the rounding up fractional shares.

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.SOLLENSYS CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s accounting year-end is March 31.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”)FASB’s ASC, 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”GAAP”) in the United States. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Eagle Lake. All intercompany accounts and transactions are eliminated in consolidation.

Management’s Representation of Interim Financial StatementsGoing Concern

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 periodtwelve months following the date of these unaudited consolidated financial statements. The Company has incurred significant operating losses since its inception. As of June 30, 2020,2021, the Company had a working capital deficit of $38,518$41,175 and negative shareholders’ equityan accumulated deficit of $38,518.$4,850,113.

Because theThe Company does not expect that existing operationalto generate operating cash flow that will be sufficient to fund presently anticipated operations thisalthough there can be no assurance. 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.financing to supplement expected cash flow. 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 do so until its operations become profitable. Also,

The Company may attempt to raise capital in the near future through the sale of equity or debt financing; however, there can be assurances the Company has,will be successful in doing so. There can be no assurance that such additional financing will be available to the past, paid for consulting services with its common stock to maximize working capital, and intends to continue this practice where feasible.Company on acceptable terms or at all.

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 consolidated 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 RecognitionManagement’s Representation of Interim Financial Statements

WeThe 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”). The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not generated any revenue since inception.misleading. These unaudited 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 unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto on December 31, 2020, as presented in the Company’s Annual Report on Form 10-KT filed on March 31, 2021, with the SEC.

SOLLENSYS CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On January 1, 2018,Revenue Recognition

Revenues are accounted for in accordance with the Company adoptedFASB’s Accounting Standards Codification (“ASC”) Topic 606,Update 2014-09, Revenue from Contracts with Customers (“(Topic 606).

The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for the products and/or services. To achieve this principle, the Company applies the following five steps:

1. Identify the contract with the customer;

2. Identify the performance obligations in the contract;

3. Determine the transaction price;

4. Allocate the transaction price to performance obligations in the contract, and

5. Recognize revenue when or as the Company satisfies a performance obligation.

The Company recognizes revenue when the control of the products is transferred to the Company’s customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for these products. Control is generally transferred when products are delivered. The Company’s revenue contracts generally represent a single performance obligation to sell its products to customers. Additionally, the Company recognizes revenue when a service is completed thereby completing a performance obligation.

Customer Deposits

Under the terms of the Company’s regional service center contracts, the Company requires a substantial deposit in advance of the support work required to be performed by the Company. All deposits that have not been deemed earned by the Company following the guidelines of ASC 606”). Results for reporting periods beginning after January 1, 2018,606 are presented under ASC 606.considered to be liabilities on the Company’s balance sheet. As of June 30, 2021, the current balance of deposits was $92,857 and the long-term balance was $214,286, compared to $17,143 and $72,857, for the yearperiod ended MarchDecember 31, 2020, the financial statements were not materially impacted as a result of the application of Topic 606 compared to Topic 605.respectively.

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, 2020,2021 and MarchDecember 31, 2020, the Company’s cash equivalents totaled $0$347,205 and $0$129,624, 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 CodificationASC for disclosure about Stock-Based Compensation.stock-based compensation. This section requires a public entity to measure the cost of employee and non-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 employeeservice is required to provide service in exchange for the award- the requisite service period (usually the vesting period).provided. No compensation cost is recognized for equity instruments for which employees doservice is not render the requisite service.provided or rendered.

Related party transactions

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.

SOLLENSYS CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 (loss) 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 (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. As of June 30, 2021, there were no common stock equivalents.

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 PARTYACCRUED EXPENSES

As of June 30, 2020,2021, and MarchDecember 31, 2020, the balances of loans payable related partyaccrued expenses were $38,518$338,024 and $26,100$46,134 respectively. These balances reflect operatingThe accrued expenses as of the Company which have been funded byJune 30, 2021, were comprised of $38,761 in credit card payables, $158,714 in liabilities associated with maintaining the Company’s Court-appointed custodianservers, $62,345 in liabilities related to the formCompany’s purchase of interest-free demand loans.a new building and $78,204 in miscellaneous liabilities.

NOTE 4 – ACCRUED EXPENSES AND ADVANCE FORM STOCKHOLDERSFIXED ASSETS

As of June 30, 2021 and December 31, 2020 the balances of “accrued expenses” and “advance from stockholder” were $-0-fixed assets amounted to $2,453,349 and $-0-, respectively, compared to $31,429 and $54,342, respectively, at March 31, 2020. During the three months endedrespectively. At June 30, 2020,2021 fixed were comprised of the following:

On June 8, 2021, the Company determined thatacquired a building in Palm Bay, Florida with approximately 36,810 square feet of office space for $2,430,762 excluding closing costs. Since the statute of limitations per Nevada law for any claims to be made relating to liabilities that hadbuilding has not yet been recorded on the Company’s books and records dating back to 2013 and prior. As a result, the Company determined itoccupied, no longer had any liability for accrued expenses or an advance to shareholder anddepreciation has been 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.

2021. The Company purchased the building by entering into a $2,500,000 mortgage. After closing costs and adjustments, the Company received $46,651 in cash at closing. 

The terms of the mortgage call for monthly interest only payments of approximately $10,000 each through December 2021 at an interest rate of 4.75%. Effective January 8, 2022, monthly mortgage payments of principal and interest of $16,250 each, at an interest rate of 4.75% per annum, with a maturity date of December 8, 2024 and a balloon payment due of approximately $2,270,000. The mortgage is secured by the underlying real estate all equipment and fixtures owned or subsequently acquired, and 500,000 shares of the Company’s common pledged by the Company’s CEO, as well his personal guarantee for the full amount of the mortgage.

The 42 month principal payment schedule on the 42 month loan is as follows:

NOTE 5 – STOCKHOLDERSSTOCKHOLDERS’ EQUITY

Series A 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 apreferred stock, par value of $0.001.$0.001 per share. Among other rights, the holders of Series A preferred shares shallstock have the right to convert each share of Series A preferred stock into 50 shares of common stock. On April 1, 2020, wethe Company issued 19,000,000 shares of Series A preferred stock to the Company’s Chiefthen-Chief Executive Officer, David Lazar. Therefore, these preferred shares can be converted to 950,000,000 sharesThe fair value of common stock. As a result of thisthe issuance the Companywas estimated at $1,900,000 and recorded stock based compensation of $1,900,000 for the three-month period ended June 30, 2020.as stock-based compensation.

Common Stock

The Company has authorized 1,500,000,000300,000,000 shares of common stock, $0.001 common stock.par value per share. As of June 30, 2020,2021 and MarchDecember 31, 2020, respectively, there were 502,075,40299,635,377 and 99,327,547 shares of common stock issued and outstanding.

During the six months ended June 30, 2021, the Company raised $862,577 from sale of 236,465 shares to investors.

Additionally, during the six months ended June 30, 2021, the Company issued an aggregate of 44,365 shares of common stock, valued at $234,360, pursuant to the Sollensys Corp 2021 Equity Incentive Plan to numerous consultants.

SOLLENSYS CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On June 30, 2021, and December 31, 2020, there were 10,000,000 shares of Series A preferred stock authorized, with -0- shares issued and outstanding. outstanding at both periods, respectively.

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

NOTE 8 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, management has evaluatedperformed an evaluation of subsequent events from June 30, 2020,2021 through the date the financial statements were available to be issued and has determined that there arenoted no itemssubsequent events 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 Statementsdisclosure except as follows:

The Company sold an aggregate of 195,822 shares of common stock to 8 investors and raised $685,377 in proceeds.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements which are included elsewhere in this Form 10-Q (the “Report”). This Reportand the related notes thereto. The management's discussion and analysis contains forward-looking statements, which relate tosuch as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect" and the like, and/or future eventstense or our future financial performance. In some cases, you canconditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These 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 predictionssubject to risks and involve known and unknown risks, uncertainties and other factors that maycould cause our or our industry’s actual results levels of activity, performance or achievementsevents to bediffer materially different from any future results, levels of activity, performance or achievementsthose expressed or implied by thesethe forward-looking statements.

While Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements andas a result of several factors. We do not undertake 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”to reflect events 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 ofcircumstances occurring after the date of this Quarterly 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

Form 10-Q. The following discussion should be read in conjunction with our audited financial statements and the related 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 statementsthat appear in the following discussion and elsewhere in thisour Annual Report and any other statement made by, or on our behalf, whether or not in future filingsForm 10-KT as filed with the Securities and Exchange Commission. Forward-looking statements are statementsCommission on March 31, 2021. 

Overview

Sollensys Corp’s (“Sollensys” or the “Company”) primary product is the Blockchain Archive Server—a turn-key, off-the-shelf, blockchain solution that works with virtually any hardware and software combinations currently used in commerce, without the need to replace or eliminate any part of the client's data security that is being utilized. The Blockchain Archive Server encrypts, fragments, and distributes data across thousands of secure nodes every day, which makes it virtually impossible for hackers to compromise. Using blockchain technology, the Blockchain Archive Server maintains a redundant, secure, and immutable backup of data. Redundant backups and the blockchain work together to assure not basedonly the physical security of the database but also the integrity of the information held within.

Blockchain Archive Server protects client data from “ransomware”—malicious software that infects your computer and displays messages demanding a fee to be paid in order for your system to work again. Blockchain technology is a leading-edge tool for data security, providing an added layer of security against data loss due to all types of software specifically designed to disrupt, damage, or gain unauthorized access to a computer system (i.e., malware).

Uniquely, the Blockchain Archive Server is a turn-key solution that can stand alone or seamlessly integrate into an existing data infrastructure to quickly recover from a cyber-attack. The Blockchain Archive Server is a server that comes pre-loaded with the blockchain-powered cybersecurity software, which can be delivered, installed, and integrated into a client’s computer systems with ease.

In December 2020, Sollensys made its second product offering—the Regional Service Center—available on historical informationa limited test market basis. The Regional Service Center was added to the Company’s standard product line effective January 1, 2021. A Regional Service Center is a single unit system of 32 Blockchain Archive Servers capable of servicing up to 2,580 individual small accounts, and which relateis marketed to future operations, strategies, financial resultsexisting IT service providers with established accounts. The Regional Service Center offers small businesses the same state of the art technology previously available only to large or very well-funded companies. Sollensys believes that smaller companies, and even certain individuals, will find the Regional Service Center affordable, paying only for the actual space they use.

In connection with the closing of the Stock Purchase, on August 5, 2020, Mr. Lazar, the then-sole member of the Board of Directors (the “Board”) of Sollensys, pursuant to the power granted to the Board in Sollensys’ bylaws, increased the size of Sollensys’ Board to two members. Simultaneously, Mr. Lazar, as the sole Board member, appointed Donald Beavers as a director to fill the newly created Board vacancy. At the same time, Mr. Lazar appointed Donald Beavers as Chief Executive Officer and Secretary of Sollensys.

Also on August 5, 2020, following the above officer and director appointments and effective on the closing of the Stock Purchase, Mr. Lazar resigned from any and all officer and director positions with Sollensys.

On November 30, 2020, Sollensys entered into a share exchange agreement (the “Share Exchange Agreement”) with (i) Eagle Lake Laboratories, Inc. (“Eagle Lake”), (ii) each of the shareholders of Eagle Lake (the “Eagle Lake Shareholders”) and (iii) Mr. Beavers as the representative of the Eagle Lake Shareholders. Among other developments. Forward-looking statements are necessarily based upon estimatesconditions to the closing of the transactions contemplated by the Share Exchange Agreement (the “SEA Closing”), pursuant to the terms of the Share Exchange Agreement, the parties agreed that Sollensys would acquire 100% of Eagle Lake’s issued and assumptions that are inherently subjectoutstanding capital stock, in exchange for the issuance to significant business, economic and competitive uncertainties and contingencies, manythe Eagle Lake Shareholders of which are beyond our control and manya number of which, concerning future business decisions, are subjectshares of Sollensys common stock 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.be determined at the SEA Closing.

The Company is currently dormant. See PlanSEA Closing occurred on November 30, 2020. Pursuant to the terms of Operationthe Share Exchange Agreement, Sollensys acquired from the Eagle Lake Shareholders 10,000,000 shares Eagle Lake’s common stock, no par value per share, representing 100% of the issued and outstanding capital stock of Eagle Lake, in Item 1exchange for the issuance to the Eagle Lake Shareholders of 95,000,000 shares of Sollensys common stock (the “Share Exchange”). At the time of the SEA Closing, Eagle Lake had 10,011,667 shares of its common stock issued and outstanding, which was 11,667 shares in excess of the number of shares of common stock authorized pursuant to Eagle Lake’s articles of incorporation. Such over-issued shares are void under Florida law and are not entitled to any rights of a stockholder of Eagle Lake. As such, the 10,000,000 shares of Eagle Lake common stock that Sollensys acquired from the Eagle Lake Shareholders, represented 100% of the issued and outstanding capital stock of Eagle Lake of the presence of over-issued shares.

GOING CONCERNAs a result of the Share Exchange, Eagle Lake became a wholly owned subsidiary of Sollensys and the business of Eagle Lake became the business of Sollensys.

Eagle Lake was incorporated in the State of Florida on May 8, 2020. Eagle Lake offers advanced technology products for cybersecurity that ensure a clients’ data integrity through collection, storage, and transmission.

Impact of COVID-19

On January 30, 2020, the World Health Organization announced a global health emergency because of the spread of a new strain of the novel coronavirus (“COVID-19”). On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. COVID-19 has significantly affected, and continues to significantly affect, the United States and global economies.

The outbreak has, and may continue to, spread, which could materially impact the Company’s business. The full extent of potential impacts on the Company’s business, financing activities and the global economy will depend on future developments, which cannot be predicted due to the uncertain nature of the continued COVID-19 pandemic, government mandated shutdowns, and its adverse effects, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on the Company’s business, operations, financial condition, and results of operations.

Results of Operations

Comparison of Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020

Revenue

For the three months ended June 30, 2021, we recorded $38,214 in subscription revenue from the rental of customized servers compared to $-0- for the three months ended June 30, 2020.

For the six months ended June 30, 2021, we recorded $109,643 in subscription revenue from the rental of customized servers compared to $-0- for the six months ended June 30, 2020.

Gross Profit

Our gross profit on revenue was $7,814 for the three months ended June 30, 2021 compared to $-0- for the three months ended June 30, 2020.

Our gross profit on revenue was $46,899 for the six months ended June 30, 2021 compared to $-0- for the six months ended June 30, 2020.

Operating Expenses

Operating expenses for the three months ended June 30, 2021 were $882,989, compared to $1,912,418 for the three months ended June 30, 2020. Key components of the Company’s expenses for the three months ended June 30, 2021 include approximately $485,786 in payroll and benefits (which includes $234,360 in stock based compensation), approximately $69,387 in legal and professional services, and $29,633 in rent expense. 

Operating expenses for the six months ended June 30, 2021 were $1,446,546, compared to $1,922,480 for the six months ended June 30, 2020. Key components of the Company’s expenses for the six months ended June 30, 2021 include approximately $894,088 in payroll and benefits (which includes $234,360 in stock based compensation), approximately $144,907 in legal and professional services, and $63,927 in rent expense. 

Liquidity and Capital Resources

As of June 30, 2021, we had $347,205 in cash and cash equivalents. Net cash used in operating activities was $691,647 for the six months ended June 30, 2021, compared to net cash used in operating activities $12,418 for the six months ended June 30, 2020.

Net cash used in investing activities was $2,453,349 for the six months ended June 30, 2021 compared to $-0- for the six months ended June 30, 2020

Net cash from financing activities was $3,362,577 for the six months ended June 30, 2021 from the proceeds of private sales of common stock to accredited investors, compared to $12,418 from related party loans during the period ended June 30, 2020.

We will have significant ongoing needs for working capital to fund operations and to continue to expand our operations. To that end, we would be required to raise additional funds through equity or debt financing. However, there can be no assurance that we will be successful in securing additional capital on favorable terms, if at all. Our inability to raise capital could require us to significantly curtail or terminate our operations altogether.

Going Concern

The accompanying unaudited consolidated financial statements accompanying this Report have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and liquidationthe satisfaction of liabilities in the normal course of business. Thebusiness for the twelve-month period following the date of these unaudited consolidated financial statements. We have incurred significant operating losses since inception. Because we do not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about our ability to continue as a going concern. Therefore, we will need to raise additional funds and are currently exploring sources of financing. Historically, we have raised capital through private offerings of debt and equity and officer loans to finance working capital needs. There can be no assurances that we will be able to continue to raise additional capital through the sale of common stock or other securities or obtain short-term loans.

Critical Accounting Estimates

Our unaudited consolidated financial statements do not include any adjustmentsand accompanying notes have been prepared in accordance with GAAP. The preparation of these unaudited consolidated financial statements requires management to make estimates, judgments, and assumptions that might resultaffect reported amounts of assets, liabilities, revenues, and expenses. We continually evaluate the accounting policies and estimates used to prepare the unaudited consolidated financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from the outcomethese estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of this uncertainty. We have a minimal operating history and minimal revenues or earnings from operations. We have no significant assetsoperations or financial resources. We will,position. Our critical accounting estimates are more fully discussed in all likelihood, sustain operating expenses without corresponding revenues for the immediate future. See “Part II, Item 8, Financial Statements and Supplementary Data.Note 2, “Summary of Significant Accounting Policies,” to our unaudited consolidated financial statements contained herein. 

LIQUIDITY AND CAPITAL RESOURCES

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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 haveare 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 “smallersmaller reporting company”, wecompany and are not required to provide tabular disclosure obligations.this information.

Off-Balance Sheet ArrangementsItem 4. Controls and Procedures.

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

Under the supervision and with the participation of our management, including our Chief Executive Officer and principal financial officer, as of June 30, 2021, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our Chief Executive Officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2021 to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that our disclosure controls are effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our chief executive officerChief Executive Officer and chiefprincipal 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 doesdo 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,A control system, no matter how well designedwell-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon 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. Further, the desireddesign of a control objectives.system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

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 in our internal control over financial reporting during the quarter ended June 30, 2021 that have materially 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 INFORMATIONreporting.

Management is not aware of anyPART II – OTHER INFORMATION

Item 1. Legal Proceedings.

There are no pending legal proceedings contemplated byto which the Company is a party or in which 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 of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is (i) a party adverse to us in any legal proceeding,the Company or (ii) has ana material interest adverse interest to us in any legal proceedings. Managementthe Company. The Company's property is not awarethe subject of any otherpending legal proceedings pending or that have been threatened against us or our properties.proceedings.

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide the information required byinclude this item.disclosure in this Quarterly Report on Form 10-Q.