UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
___________________
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
Commission File Number: 333-168068
SOLARFLEX CORP.
(Exact Name Of Registrant As Specified In Its Charter)
| Delaware | 42-1771817 |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
| c/o Sergei Rogov, 12 Abba Hillel Silver Street, 11th Floor, Ramat Gan, Israel | 52506 |
| (Address of Principal Executive Offices) | (ZIP Code) |
Registrant's Telephone Number, Including Area Code: +(972) 3-753-9888
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 x No ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company .
| Large accelerated filer ¨ | Accelerated filer ¨ | Non-Accelerated filer ¨ | Smaller reporting company x |
On May 12, 2014, the Registrant had 134,999,990 shares of common stock outstanding.
| Item | Description | Page | |||
|---|---|---|---|---|---|
PART I - FINANCIAL INFORMATION | |||||
| ITEM 1. | FINANCIAL STATEMENTS. | 3 | |||
| Balance Sheets | 4 | ||||
| Statements of Operations | 5 | ||||
| Statements of Cash Flows | 6 | ||||
| Notes to Financial Statements | 7 | ||||
| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDISTIONS AND PLAN OF OPERATIONS. | 8 | |||
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 10 | |||
| ITEM 4. | CONTROLS AND PROCEDURES. | 10 | |||
PART II - OTHER INFORMATION | |||||
| ITEM 1. | LEGAL PROCEEDINGS. | 11 | |||
| ITEM 1A. | RISK FACTORS. | 11 | |||
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 11 | |||
| ITEM 3. | DEFAULT UPON SENIOR SECURITIES. | 11 | |||
| ITEM 4. | MINE SAFTY DISCLOSURE. | 11 | |||
| ITEM 5. | OTHER INFORMATION. | 11 | |||
| ITEM 6. | EXHIBITS. | 11 | |||
PART I - FINANCIAL INFORMATION
| Balance Sheets as of March 31, 2014 (Unaudited) and December 31, 2013 (Audited) | F-3 |
| Statements of Operations for the Periods Ended March 31, 2014 and 2013 and Cumulative from Inception (February 2, 2010) to March 31, 2014 (Unaudited) | F-4 |
| Statements of Cash Flows for the Periods March 31, 2014 and 2013 and Cumulative from Inception (February 2, 2010) to March 31, 2014 (Unaudited) | F-6 |
| Notes to Unaudited Interim Financial Statements | F-7 |
| SOLARFLEX CORP. | ||||
| (A Development Stage Company) | ||||
| Balance Sheets | ||||
| As of March 31, 2014 and December 31, 2013 | ||||
| Back to Table of Contents | ||||
| March 31, 2014 | December 31, 2013 | |||
| (Unaudited) | (Audited) | |||
ASSETS | ||||
| Current assets: | ||||
| Cash | $ | 26,301 | $ | 971 |
| Total current assets | 26,301 | 971 | ||
| Total Assets | $ | 26,301 | $ | 971 |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||
| Current liabilities: | ||||
| Accrued expenses | $ | 4,000 | $ | 6,557 |
| Accrued interest | 2,027 | 649 | ||
| Current portion of convertible notes payable, net of discount of $58,112 and $14,589, respectively | 16,888 | 5,411 | ||
| Total current liabilities | 22,915 | 12,617 | ||
| Total liabilities | 22,915 | 12,617 | ||
| Stockholders' equity (deficit): | ||||
| Common stock, par value $0.0001 per share; 500,000,000 shares authorized; | ||||
| 134,999,990 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively | 13,500 | 13,500 | ||
| Additional paid-in capital | 436,316 | 381,316 | ||
| Deficit accumulated during the development stage | (446,430) | (406,462) | ||
| Total stockholders' equity (deficit) | 3,386 | (11,646) | ||
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 26,301 | $ | 971 |
| See notes to unaudited interim financial statements. | ||||
| SOLARFLEX CORP. | ||||||
| (A Development Stage Company) | ||||||
| Statements of Operations | ||||||
| For the Three Months Ended March 31, 2014 and 2013 and for the Period from Inception (February 2, 2010) to March 31, 2014 | ||||||
| (Unaudited) | ||||||
| For the | For the | Cumulative from | ||||
| Three Months Ended | Three Months Ended | Inception (February 2, 2010) | ||||
| March 31, 2014 | March 31, 2013 | to March 31, 2014 | ||||
| Revenue | $ | - | $ | - | $ | - |
| Expenses: | ||||||
| General and administrative | 27,113 | 9,458 | 213,990 | |||
| Depreciation expense | - | - | 26,495 | |||
| Impairment of fixed assets | - | - | 183,505 | |||
| Total general and administrative expenses | 27,113 | 9,458 | 423,990 | |||
| Loss from operations | (27,113) | (9,458) | (423,990) | |||
| Other income (expense): | ||||||
| Interest expense | (1,378) | - | (7,871) | |||
| Amortization of debt discount | (11,477) | - | (16,888) | |||
| Other income | - | - | 2,319 | |||
| Total costs and expenses | 39,968 | 9,458 | 446,430 | |||
| Net loss before income taxes | (39,968) | (9,458) | (446,430) | |||
| Income taxes | - | - | - | |||
| Net loss | $ | (39,968) | $ | (9,458) | $ | (446,430) |
| Basic and diluted per share amounts: | ||||||
| Basic and diluted net loss | $ | (0.00) | $ | (0.00) | ||
| Weighted average shares outstanding (basic and diluted) | 134,999,990 | 5,709,259 | ||||
| See notes to unaudited interim financial statements. | ||||||
| SOLARFLEX CORP. | ||||||
| (A Development Stage Company) | ||||||
| Statements of Cash Flows | ||||||
| For the Three Months Ended March 31, 2014 and 2013 and for the Period from Inception (February 2, 2010) to March 31, 2014 | ||||||
| (Unaudited) | ||||||
| For the | For the | Cumulative from | ||||
| Three Months Ended | Three Months Ended | Inception (February 2, 2010) | ||||
| March 31, 2014 | March 31, 2013 | to March 31, 2014 | ||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (39,968) | $ | (9,458) | $ | (446,430) |
| Adjustments required to reconcile net loss to cash used in operating activities: | ||||||
| Amortization of debt discount | 11,477 | - | 16,888 | |||
| Depreciation | - | - | 26,495 | |||
| Imputed interest | - | - | 5,844 | |||
| Impairment of fixed assets | - | - | 183,505 | |||
| Changes in net assets and liabilities: | ||||||
| Increase (decrease) in accounts payable and accrued liabilities | (1,179) | - | 6,027 | |||
| Net cash used in operating activities | (9,458) | (9,458) | (207,671) | |||
| Cash flows from investing activities: | ||||||
| Purchase of equipment | - | - | (30,000) | |||
| Net cash used in investing activities | - | - | (30,000) | |||
| Cash flows from financing activities: | ||||||
| Proceeds from issuance of common stock | - | 15,000 | 135,300 | |||
| Offering costs | - | - | (25,000) | |||
| Proceeds of convertible debt | 55,000 | - | 75,000 | |||
| Proceeds from related party loans | - | 100 | 78,672 | |||
| Net cash provided by financing activities | 55,000 | 15,100 | 263,972 | |||
| Change in cash | 25,330 | 5,642 | 26,301 | |||
| Cash - Beginning of period | 971 | - | - | |||
| Cash - End of period | $ | 26,301 | $ | 5,642 | $ | 26,301 |
| See notes to unaudited interim financial statements. | ||||||
| Supplemental Cash Flow Disclosure: | ||||||
| Common stock issued to purchase equipment | $ | - | $ | - | $ | 180,000 |
| Debt discount | $ | 55,000 | $ | - | $ | 75,000 |
| Related party debt forgiveness | $ | - | $ | - | $ | 78,672 |
SOLARFLEX CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
Back to Table of Contents
1. The Company and Significant Accounting Policies
Organizational Background:Solarflex Corp. (“Solarflex” or the “Company”) is a Delaware corporation in the development stage and has not commenced operations. The Company was incorporated under the laws of the State of Delaware on February 12, 2010. The business plan of the Company is to develop a commercial application of the design in a patent of a “Solar element and method of manufacturing the same”. The Company also intends to produce a prototype, and manufacture and market the product and/or seek third party entities interested in licensing the rights to manufacture and market the device. The accompanying financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.
Basis of Presentation: The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of March 31, 2014, the cash resources of the Company were insufficient to meet its current business plan, and the Company had negative working capital. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
Significant Accounting Policies
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.
Cash and Cash Equivalents: For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There were no cash equivalents as of March 31, 2014 and December 31, 2013.
Property and Equipment: New property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.
Valuation of Long-Lived Assets: We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
Stock Based Compensation: Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company’s common stock, the estimated volatility of the Company’s common stock, the exercise price of the warrants and the risk free interest rate.
Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock: We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.
Fair Value of Financial Instruments: FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At March 31, 2014 and December 31, 2013, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.
Fair Value Measurements: The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2: Inputs to the valuation methodology include:
- Quoted prices for similar assets or liabilities in active markets;
- Quoted prices for identical or similar assets or liabilities in inactive markets;
- Inputs other than quoted prices that are observable for the asset or liability;
- Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The assets or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.The following table presents assets that were measured and recognize at fair value on March 31, 2014 and December 31.2013 and the year periods ended on a recurring basis:
Fair Value Measurements at March 31, 2014 | ||||||||
Quoted Prices in Active | Significant Other | Significant | ||||||
Markets for Identical Assets | Observable Inputs | Unobservable Inputs | ||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||
| None | $ | - | $ | - | $ | - | $ | - |
| Total assets at fair value | $ | - | $ | - | $ | - | $ | - |
Fair Value Measurements at December 31, 2013 | ||||||||
Quoted Prices in Active | Significant Other | Significant | ||||||
Markets for Identical Assets | Observable Inputs | Unobservable Inputs | ||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||
| None | $ | - | $ | - | $ | - | $ | - |
| Total assets at fair value | $ | - | $ | - | $ | - | $ | - |
When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the fiscal periods ended March 31, 2014 and 2013, there were no significant transfers of financial assets or financial liabilities between the hierarchy levels.
Earnings per Common Share: We compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
On September 20, 2013we declared aforward split of our common stock.The formula provided that every one (1) issued and outstanding shares of common stock of the Corporation be automatically split into ten (10) shares of common stock. Theforward stock split was effective September 20, 2013 for holders of record as of that date. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this split. All per share disclosures retroactively reflect shares outstanding or issuable as though the forward split had occurred at inception, February 12, 2010.
Income Taxes: We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.
Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset. Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.
ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.
Uncertain Tax Positions
The Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN No. 48”) which was effective for the Company on January 1, 2007. FIN No. 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements.
Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2008. We are not under examination by any jurisdiction for any tax year. At December 31, 2013 we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FIN 48.
Recent Accounting Pronouncements
In July 2013, FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013002, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:
- Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and
- Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013002 is not expected to have a material impact on our financial position or results of operations.
In January 2013, the FASB issued ASU No. 2013001, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011011. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011011 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011011, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013001 is not expected to have a material impact on our financial position or results of operations.
Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.
The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2013 Annual Report and should be read in conjunction with the Notes to Financial Statements which appear in that report.
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates 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 resources. Actual results may differ from these estimates under different assumptions or conditions.
In the opinion of management, the information furnished in these interim financial statements reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three-month periods ended March 31, 2014 and 2013. All such adjustments are of a normal recurring nature. The Financial Statements do not include some information and notes necessary to conform to annual reporting requirements.
2. Stockholders' Equity
Common Stock Split
On September 20, 2013, we declared aforward split of our common stock.The formula provided that every one (1) issued and outstanding shares of common stock of the Corporation be automatically split into ten (10) shares of common stock. The forward stock split was effective September 20, 2013 for holders of record as of that date. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this split. All per share disclosures retroactively reflect shares outstanding or issuable as though the forward split had occurred at inception, February 12, 2010.
Historical Activity Prior to 2014:
During the year ended December 31, 2013 we issued 20,000,000 shares of our common stock in exchange for $60,000. The shares were sold for $0.003 per share to seven individuals. We also issued 60,000,000 shares valued at $0.003 or $180,000 as consideration for the purchase of equipment.
On February 24, 2010, the Company issued 2,340,000 shares of its common stock to individuals who are Directors and officers of the company for $234.
On February 24, 2010, the Company issued 660,000 shares of its common stock to individuals who are founders of the company for $66.
The Company commenced a capital formation activity by filing a Registration Statement on Form S-1 with the SEC to register and sell in a self-directed offering 2,500,000 shares of newly issued common stock at an offering price of $0.03 per share for proceeds of up to $75,000. The Registration Statement was declared effective on February 10, 2012. On August 6, 2012, the Company issued 2,500,000 shares of common stock pursuant to the Registration Statement on Form S-1 for proceeds of $75,000. The offering costs of $25,000 related to this capital formation activity were charged against the capital raised.
3. Related Party transactions not disclosed elsewhere:
Due Related Parties: Amounts due related parties consist of corporate reinstatement and regulatory compliance expenses paid directly by various directors and shareholders of the company. Such items totaled $78,672. The advances were not formalized by a written agreement and do not carry a specific date of payment and are non-interest bearing. The advances were forgiven in 2013 and reflected as additional paid-in capital.
4. Convertible Notes
Current 2014 Reporting Period:
During 2014 the Company signed four unsecured promissory notes with unrelated parties for an aggregate of $55,000. The notes bear interest at12% per annum and are due approximately one year from the date of issuance. The notes have a conversion right that allows the holder of each note to convert the principal balance into the Company’s common stock at the lender's sole discretion at $0.03 per share.
In accordance with ASC 470, the Company has analyzed the beneficial nature of the conversion terms and determined that a beneficial conversion feature (BCF) exists because the effective conversion price was less than the quoted market price at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method as stipulated in ASC 470. The BCF of $55,000 has been recorded as a discount to the notes payable and to Additional Paid-in Capital.
Historical Activity Prior to 2014:
During 2013 the Company signed four unsecured promissory notes with unrelated parties for an aggregate of $20,000. The notesbear interest at12% per annum and are due approximately one year from the date of issuance. The notes have a conversion right that allows the holder ofeach note to convert the principal balance into the Company’s common stock at the lender's sole discretion at $0.03 per share.
In accordance with ASC 470, the Company has analyzed the beneficial nature of the conversion terms and determined that a beneficial conversion feature (BCF) exists because the effective conversion price was less than the quoted market price at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method as stipulated in ASC 470. The BCF of $20,000 has been recorded as a discount to the notes payable and to Additional Paid-in Capital.
For the period ended March 31, 2014 the Company has recognized $1,378 in accrued interest expense related to the convertible notes and has amortized $11,477 of the beneficial conversion feature which has also been recorded as interest expense. The carrying value of convertible note is as follows:
March 31, 2014 | December 31, 2013 | |||
| Face amount of the notes | $ | 75,000 | $ | 20,000 |
| Less unamortized discount | $ | (58,112) | $ | (14,589) |
| Carrying value | $ | 16,888 | $ | 5,411 |
5. Future Commitment
On March 10, 2010, the Company entered into a Patent Sale Agreement whereby the Company acquired all of the rights, title and interest in the patent known as the “Solar element and method of manufacturing the same”. In consideration of the sale the Company agrees to pay to seller a sum equal to 10% of the royalties that the Company will receive in relation to the patent for an indefinite period.
6. Impairment of Equipment
On May 15, 2013, the Company acquired equipment through payment of $30,000 in cash and the issuance of 60,000,000 shares of common stock valued by the company at $180,000. The shares of restricted common stock were valued at the most recent third party sales of the Company's common stock. At the time of the equipment was acquired, the machine was not in working order. As of March 31, 2014, the machine has not yet been in working order and no estimated timeline has been established for this to occur. The Company intends to use the machine in the future for development of its solar panel technology. However, as a result of not having any concrete plan in place to put the machine a working order, and given the circumstances the equipment was impaired at December 31, 2013.
7. Development Stage Activities and Going Concern
The Company is currently in the development stage and has limited operations. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of March 31, 2014, the cash resources of the Company were insufficient to meet its current business plan. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
8. Subsequent Events
There were no material subsequent events following the period ended March, 31, 2014 and throughout the date of the filing of Form 10-Q.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
As used in this Form 10-Q, references to the “SOLARFLEX CORP ,” Company,” “we,” “our” or “us” refer to SOLARFLEX CORP . 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.
For a description of such risks and uncertainties refer to our Registration Statement on Form S-1, filed with the Securities and Exchange Commission. 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. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Plan of Operation
We are a development stage company that has acquired the rights to a patent application for the design of and manufacturing method for a solar photovoltaic conversion element which is expected to reduce cost, enhance the flexibility of the manufacturing process, improve manufacturing efficiency and absorb the solar spectrum better than current models, which should enable our product to increase solar energy conversion rates.
Our goal in the next twelve months is to complete development and production of a fully operational prototype of our solar photovoltaic conversion element, identify sub-contractors or licensees which will have the ability to design and manufacture our product in commercial quantities, and market our product to solar panel producers.
Although we have not yet engaged a manufacturer to develop a fully operational prototype of the solar photovoltaic conversion element, based on our preliminary discussions with certain manufacturers, we believe that it will take approximately twelve months, from design to manufacture, to produce a basic prototype of our product. Once the prototype has been produced, we plan for the design and development of a commercial product to be carried out by specialist subcontractors offering expertise in several relevant disciplines, including plastics and metal, electricity and electronics, device design, operation and control, automation and mechanics, computer and microcomputers, and others.
We initially intend to focus on the following activities:
- Locating third parties to perform research and development and engineering services
- Completing development of our solar photovoltaic conversion element.
- Producing a working prototype of our product.
- Locating sub-contractors or licensees to design and manufacture our product in commercial quantities
- Marketing our product to solar panel producers.
We estimate the cost to develop and produce the prototype at $14,000, which include $10,500 in technology development and engineering costs, and $3,500 for the manufacture of the prototype.
The design and development of a working prototype of our product will be divided into three stages:
a) Technical Concept/Definition (three months) – to be performed by management and a third party contractor.
b) Engineering Specification (four months) – to be performed by management and a third party contractor.
c) Engineering & Preparation for Production & Actual Manufacture (four months) – to be performed by management and a third party contractor
If and when we have a viable prototype, depending on the availability of funds, we estimate that we would need approximately an additional four to six months to bring this product to market. Our objective is either to manufacture the product ourselves through third party sub-contractors, and market the product as an off-the-shelf device, and/or to license the manufacturing rights to the product and related technology to third party manufacturers who would then assume responsibility for marketing and sales.
Results of Operations during the three months ended March 31, 2014 as compared to the three months ended March 31, 2013
We have not generated any revenues since inception. We have operating expenses related to general and administrative expenses being a public company and interest expenses. During the three months ended March 31, 2104, we incurred a net loss of $39,968 due to general and administrative expenses of $27,113, interest expenses of $1,3784 and amortization of debt discount expenses of $11,477 compared to a net loss of $9,458 due to general and administrative expenses in the same amount during the three months ended March 31, 2013.
Liquidity and Capital Resources
On March 31, 2014, we had $26,301 in cash as compared to $971 in cash at December 31, 2013. We had total current liabilities of $22,915 consisting of $4,000 in accrued expenses, $2,027 in accrued interest and $16,888 in current portion of convertible notes payable compared to total current liabilities of $12,617 as of December 31, 2013 conisting of $6,557 in accrued expenses, accrued interest of $649 and $5,411 in current portion of convertible notes payable. Our accumulated deficits as of March 31, 2014 and December 31, 2103 were $446,430 and $406,462, respectively.
We used $29,670 in our operating activities during the three-month period ended March 31, 2104, which was due to a net loss of $39,968 offset by amortization of debt discount expenses of $11,477 and a decrease in accounts payable and accrued liabilities by $1,179. We used $9,458 in our operating activities during the three-month period ended March 31, 2103, which was the result of a net loss in the same amount.
We financed our negative cash flow from operations during the three-month period through the issuance of $55,000 in convertible debt. We financed our negative cash flow from operations during the three-month period ended March 31, 2013 through proceeds of $15,000 from issuance of common stock and $100 from related party loans.
Going Concern Consideration
Our auditors have issued an opinion on our annual financial statements which includes a statement describing our going concern status. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing the product.
The Company does not believe that without cash resources it will be able to fund its expenses over the next 12 months. There can be no assurance that additional capital will be available to the Company. The Company currently has no agreements, arrangements, or understandings with any person to obtain funds through bank loans, lines of credit, or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of disclosure controls and procedures. As of March 31, 2014, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
Changes in internal controls. During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
There are no pending legal proceedings to which the Company is a party or in which any 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 a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES UND USE OF PROCEEDS.
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFTY DISCLOSURE.
None.
None.
| Exhibit No. | Description |
| 31.1 | Certification of CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | Certification of CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1 | Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 | Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Solarflex Corp | |||
| Date: May 12, 2014 | By: | /s/ Sergei Rogov | |
| Name: Sergei Rogov | |||
| Title: Chief Executive Officer | |||
| By: | /s/ Sergei Rogov | ||
| Name : Sergei Rogov | |||
| Title : Principal Accounting and Financial Officer | |||
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: May 12, 2014 | By: | /s/ Sergei Rogov | |
| Name: Sergei Rogov | |||
| Title: Chief Executive Officer and Chairman | |||