NOTES TO FINANCIAL STATEMENTS
(1)
Summary of Significant
Accounting Policies
Basis of Presentation and Organization
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.
Cash and Cash Equivalents
For purposes of reporting within the statement
of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all
highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.
Revenue Recognition
The Company is in the development stage and
has yet to realize revenues from operations. Once the Company has commenced operations, it will recognize revenues when delivery
of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved
by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any
related receivable is probable.
Loss per Common Share
Basic loss per share is computed by dividing
the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during
the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the periods
ended December 31, 2011 and December 31, 2010.
Income Taxes
Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain
assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified
according to the financial statement classification of the assets and liabilities generating the differences.
The Company maintains a valuation allowance
with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing
the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current
period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward
period under the Federal tax laws.
Changes in circumstances, such as the Company
generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change
in the valuation allowance will be included in income in the year of the change in estimate.
Fair Value of Financial Instruments
The Company estimates the fair value of financial
instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair
value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market
exchange. As of December 31, 2011, the carrying value of accounts payable, accrued liabilities, and loans from directors and stockholders
approximated fair value due to the short-term nature and maturity of these instruments.
Deferred Offering Costs
The Company defers as other assets the direct
incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering,
the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations
during the period in which the offering is terminated.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of
long-lived assets and the related estimated remaining lives when events or circumstances lead management to believe that the carrying
value of an asset may not be recoverable. For the period ended v, no events or circumstances occurred for which an evaluation of
the recoverability of long-lived assets was required.
Common Stock Registration Expenses
The Company considers incremental costs and
expenses related to the registration of equity securities with the SEC, whether by contractual arrangement as of a certain date
or by demand, to be unrelated to original issuance transactions. As such, subsequent registration costs and expenses are expensed
as incurred.
Estimates
The financial statements are prepared on the
basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets, liabilities and expenses. Actual results could differ from those estimates made by management.
Fiscal Year End
The Company has adopted a fiscal year end
of December 31.
Recent Accounting Pronouncements
In May 2011, the FASB issued ASU 2011-04,
"Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.
GAAP and International Financial Reporting Standards ("IFRSs")." Under ASU 2011-04, the guidance amends certain
accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S.
GAAP and in IFRS and that their respective fair value measurement and disclosure requirements are the same. ASU 2011-04 is effective
for public entities during interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Company
does not believe that the adoption of ASU 2011-04 will have a material impact on the Company's results of operation and financial
condition.
In June 2011, the FASB issued ASU No. 2011-05,
"Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income," ("ASU 2011-05") which amends
current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive
income as part of the statement of shareholders' equity. Instead, comprehensive income must be reported in either a single continuous
statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but
consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after
Dec. 15, 2011 with early adoption permitted. The Company does not believe that the adoption of ASU 2011-05 will have a material
impact on the Company's results of operation and financial condition.
There were various other updates recently
issued, most of which represented technical corrections to the accounting literature or application to specific industries. None
of the updates are expected to a have a material impact on the Company's financial position, results of operations or cash flows.
(2)
Development Stage Activities
and Going Concern
The Company is currently in the development
stage, and has no operations. 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.
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. The Israeli Patent number
is 198369.
The Company has commenced a capital formation
activity by filing a Registration Statement on Form S-1 to 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. As of March 31, 2011, the Company
accrued $25,000 of deferred offering costs related to this capital formation activity. The Registration Statement was declared
effective on February 10, 2012.
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 December 31, 2011 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.
(3)
Patent
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 application 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 application for an indefinite period.
The Israeli Patent number is 198369.
(4)
Loans from Related Parties
- Directors and Stockholders
As of December 31, 2011, loans from related
parties amounted to $54,977 and represented working capital advances from Directors who are also stockholders of the Company. The
loans are unsecured, non-interest bearing, and due on demand.
(5)
Common Stock
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 has commenced a capital formation
activity by filing a Registration Statement on Form S-1 to 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. As of March 31, 2011, the Company
accrued $25,000 of deferred offering costs related to this capital formation activity. The Registration Statement was declared
effective on February 10, 2012.
(6)
Income Taxes
The provision (benefit) for income taxes for
the periods ended December 31, 2011 and 2010, was as follows (assuming a 23% effective tax rate):
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Current Tax Provision:
|
|
|
|
|
|
|
|
|
Federal-
|
|
|
|
|
|
|
|
|
Taxable income
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total current tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Provision:
|
|
|
|
|
|
|
|
|
Federal-
|
|
|
|
|
|
|
|
|
Loss carryforwards
|
|
$
|
3,787
|
|
|
$
|
8,818
|
|
Change in valuation allowance
|
|
|
(3,787
|
)
|
|
|
(8,818
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company had deferred income tax assets
as of December 31, 2011 and 2010, as follows:
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Loss carryforwards
|
|
$
|
12,605
|
|
|
$
|
8,818
|
|
Less - Valuation allowance
|
|
|
(12,605
|
)
|
|
|
(8,818
|
)
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company provided a valuation allowance
equal to the deferred income tax assets for the periods ended December 31, 2011 and 2010, because it is not presently known whether
future taxable income will be sufficient to utilize the loss carryforwards.
As of December 31, 2011, the Company had approximately
$55,000 in tax loss carryforwards that can be utilized in future periods to reduce taxable income, and expire by the year 2031.
The Company did not identify any material uncertain tax positions.
The Company did not recognize any interest or penalties for unrecognized tax benefits.
The Company will file income tax returns in
the United States. All tax years are closed by expiration of the statute of limitations.
(7)
Related Party Transactions
As described in Note 4, as of December 31,
2011, the Company owed $54,977 to Directors, officers, and principal stockholders of the Company for working capital loans.
As described in Note 5, on February 24, 2010,
the Company issued 2,340,000 shares of its common stock to Directors and officers for $234.
(8) Commitments
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.