NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2014
|
NOTE
1
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
|
(A) Organization
NC Solar, Inc. (a development
stage company) (the "Company") was incorporated under the laws of the State of Nevada on December 9, 2010. NC Solar,
Inc. was incorporated in Nevada in 2010 to develop solar energy collection farms on commercial and/or industrial buildings located
on distressed, blighted and/or underutilized commercial land in North Carolina and other southern states of the U.S. Renewable
energy collected by these farms of solar collection panel systems will be sold directly to local utility companies for resale to
their customers.
Stoneville Solar, LLC. (a development
stage company) was incorporated under the laws of the State of North Carolina on December 14, 2010.
Activities during the development
stage include developing the business plan and raising capital.
On
June 6, 2014, the Board of Directors of the Company (the “Board”) approved a change in the Company’s fiscal year
end from April 30 to March 31.
(B) Principles of Consolidation
The accompanying 2014 and 2013
consolidated financial statements include the accounts of NC Solar, Inc. and its wholly owned subsidiary, Stoneville Solar, LLC
(collectively, the “Company”). All intercompany accounts have been eliminated upon consolidation.
(C) Use of Estimates
In preparing financial statements
in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reported period. Significant estimates include valuation of in kind contribution
of services and interest, valuation of deferred tax assets and provision for allowance for doubtful accounts. Actual results could
differ from those estimates.
(D) 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. At March 31, 2014 and
April 30, 2013, the Company had no cash equivalents.
(E) Loss Per Share
Basic and diluted net loss per common share is computed
based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, “Earnings Per Share.” For
the eleven months ended March 31, 2014 and 2013 and for the year ended April 30, 2013, there were no common share equivalents outstanding.
(F) Income Taxes
The Company accounts for income taxes under
FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, 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 ASC
740-10-25, 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.
NC SOLAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2014
The net deferred tax liability in the accompanying
balance sheets includes the following amounts of deferred tax assets and liabilities:
|
|
March 31, 2014
|
|
|
April 30, 2013
|
|
Deferred tax liability:
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred tax asset
|
|
|
|
|
|
|
|
|
Net Operating Loss Carryforward
|
|
|
114,640
|
|
|
|
89,730
|
|
Valuation allowance
|
|
|
(114,640
|
)
|
|
|
(89,730
|
)
|
Net deferred tax asset
|
|
|
-
|
|
|
|
-
|
|
Net deferred tax liability
|
|
$
|
-
|
|
|
$
|
-
|
|
The valuation allowance was established to reduce the deferred tax asset to the amount that will more likely than not to be realized. This is necessary due to the Company’s continued operating losses and the uncertainty of the Company’s ability to utilize all of the net operating loss carryforwards before they will expire through the year 2034.
The components of income
tax expense related to continuing operations are as follows:
|
|
March 31, 2014
|
|
|
April 30, 2013
|
|
Federal
|
|
$
|
|
|
|
$
|
|
|
Current
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
State and Local
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
As of March 31, 2014 and April
30, 2013, the Company has a net operating loss carry forward of approximately $269,528 and $189,518, respectively, available to
offset future taxable income through March 31, 2024. The valuation allowance was established to reduce the deferred tax asset to
the amount that will more likely than not be realized. This is necessary due to the Company’s continued operating loss and
the uncertainty of the Company’s ability to utilize all of the net operating loss carryforwards before they will expire through
the year 2034.
The net change in the valuation
allowance for the eleven months ended March 31, 2014 and for the year ended April 30, 2013 was an increase of $24,910 and $65,940
respectively.
The Company’s income tax expense differed
from the statutory rates (federal 34% and state 4.55%) as follows:
NC SOLAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2014
|
|
March 31, 2014
|
|
|
April 30, 2013
|
|
Statutory rate applied to earnings before income taxes:
|
|
$
|
(32,363
|
)
|
|
$
|
(73,965
|
)
|
Increase (decrease) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
State income taxes
|
|
|
|
|
|
|
|
|
Change in deferred tax asset valuation allowance
|
|
|
24,910
|
|
|
|
65,940
|
|
Non-deductible expenses
|
|
|
7,454
|
|
|
|
8,025
|
|
Income Tax Expense
|
|
|
-
|
|
|
|
-
|
|
The company’s federal income tax returns for
the eleven months ended March 31, 2014 and for the years ended April 30, 2013 and 2012 remain subject to examination by the Internal
Revenue Service through 2019.
(G) Business Segments
The Company operates in one
segment and therefore segment information is not presented.
(H) Revenue Recognition
The Company recognizes revenue
on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”. In all cases, revenue is recognized
only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability
of the resulting receivable is reasonably assured. The Company generates revenue from the sale of energy collected by the photovoltaic
system as the revenue is earned. The Company recognized Grant Income at the time it is earned and all grant provisions have been
satisfied and the grants are non-refundable.
(I) Equipment
The Company values equipment
at cost and depreciates these assets using the straight-line method over their expected useful life, which is estimated to be five-years.
In accordance with ASC No. 360,
Property, Plant and Equipment
, the Company carries long-lived assets at the lower of the carrying amount or fair value.
Impairment is evaluated by estimating future undiscounted cash flows expected to result from the use of the asset and its eventual
disposition. If the sum of the expected undiscounted future cash flow is less than the carrying amount of the assets, an impairment
loss is recognized. Fair value, for purposes of calculating impairment, is measured based on estimated future cash flows, discounted
at a market rate of interest.
(J) Concentration of
Credit Risk
At March 31, 2014 and April
30, 2013, accounts receivable of $361 and $513, respectively, consisted of two main types of receivables; receivables from a local
utility company for energy resale and an energy rebate from the State of North Carolina.
For the eleven months ended March 31, 2014, the local
utility company accounted for approximately 17% of revenues and 6% of the total outstanding accounts receivable and the energy
rebate from the state of North Carolina accounted for 83% of revenue and 94% of total outstanding accounts receivable.
For the year ended April 30, 2013, the local utility
company accounted for approximately 15% of revenues and 3% of the total outstanding accounts receivable and the energy rebate from
the state of North Carolina accounted for 85% of revenue and 97% of total outstanding accounts receivable.
(K) Recent Accounting
Pronouncements
In June 2014, FASB issued Accounting
Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial
Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The update
removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic
915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties
(Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about
the risks and uncertainties related to the company’s current activities. Furthermore, the update removes an exception provided
to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity—which
may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in
a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014,
including interim periods within that reporting period. This updated guidance did not have a material impact on our results of
operations, cash flows or financial condition.
In June 2014, FASB and IASB jointly issued an exposure draft (ED), Revenue from Contracts with Customers.
The ED, released by the FASB as proposed ASU No. 2014-09, “Revenue from Contracts with Customers”. The update gives
entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts
to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide
goods or services, would supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific
guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included
in Subtopic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. The update removes inconsistencies
and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information
to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue
recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial
statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods
beginning after December 15, 2016, including interim periods within that reporting period. This updated guidance did not have a
material impact on our results of operations, cash flows or financial condition.
|
NOTE
2
|
ACCOUNTS
RECEIVABLE
|
NC SOLAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2014
At March 31, 2014 and April 30, 2013, the Company
had the following accounts receivable:
|
|
March
31, 2014
|
|
|
April
30, 2013
|
|
Accounts receivable
|
|
$
|
361
|
|
|
$
|
513
|
|
Less: Allowance for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
Accounts receivable, net
|
|
$
|
361
|
|
|
$
|
513
|
|
|
|
March
31, 2014
|
|
|
April
30, 2013
|
|
Equipment
|
|
$
|
25,610
|
|
|
$
|
62,318
|
|
Less: Accumulated depreciation
|
|
|
(25,610
|
)
|
|
|
(62,318
|
)
|
Equipment, net
|
|
$
|
-
|
|
|
$
|
-
|
|
Depreciation expenses related
to the Company’s photovoltaic system were $0 and $9,424 for the eleven months ended March 31, 2014 and 2013 (unaudited),
$12,566 for the year ended April 30, 2013 and $25,610 for the period from December 9, 2010 (inception) to March 31, 2014. During
the year ended April 30, 2013 the equipment was fully impaired, and the Company recognized a loss of $36,708 for the remaining
balance.
On November 13, 2012, the Company
received a promissory note from Alternative Energy and Environmental Solutions, Inc. (the “Borrower”) in exchange for
$6,034. The note was non-interest bearing and due on demand. During the year ended April 30, 2013 the Company fully reserved the
note.
During the eleven months ended
March 31, 2014, the Company issued an unsecured promissory note in the amount of $8,000 to an unrelated party. Pursuant to the
terms of the note, the note is non-interest bearing and is due on demand. For the eleven months ended March 31, 2014, the
Company recorded $263 as an in-kind contribution of interest (see Note 6(D)). Subsequent to March 31, 2014, the note holder forgave
the promissory note and the amount was recorded as a gain on settlement of debt.
|
NOTE 6
|
STOCKHOLDERS’ EQUITY
|
(A) Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share. Preferred stock may be issued in one or more series, with those rights and preferences determined by the board of directors. As of March 31, 2014 and April 30, 2013, no preferred shares are issued and outstanding.
(B) Common Stock Issued
for Cash
The Company is authorized to
issue 100,000,000 shares of common stock with a par value of $0.0001 per share.
NC SOLAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2014
For the year ended April 30,
2012, the Company issued 900,012 shares of common stock for $135,000 ($0.15/share), less direct offering costs of $11,825.
For the period ended April 30,
2011 the Company issued 551,339 shares of common stock for $82,700 ($0.15/share) less stock subscription receivable of $450 which
was collected on November 30, 2011.
During December 2010 the Company
also issued 7,500,000 shares of common stock to its two founders for $750 ($0.0001 per share) in exchange for cash (See Note 8).
(C) In-Kind Contribution
For the eleven months ended
March 31, 2014 two shareholders of the Company contributed services having a fair value of $19,066 (See Note 8).
For the year ended April 30,
2013, two shareholders of the Company contributed services having a fair value of $20,800 (See Note 8).
For the year ended April 30,
2012, two shareholders of the Company contributed services having a fair value of $20,800 (See Note 8).
For the period ended April 30,
2011 two shareholders of the Company contributed services having a fair value of $8,000 (See Note 8).
(D) In-Kind of Interest
The Company recorded $263 as
an in-kind contribution of interest (See Note 5).
(A) Consulting Agreements
On August 1, 2011 the Company
entered into a consulting agreement to receive administrative and other miscellaneous services. The Company is required to pay
$5,000 a month. The agreement is to remain in effect unless either party desires to cancel the agreement. The agreement was terminated
effective June 19, 2014.
(B) Operating Lease
Agreements
On August 11, 2011, the Company
executed a one-year non-cancelable operating lease for a place to locate its photovoltaic equipment. The lease began on April 1,
2011 and expired on April 1, 2012. The Company currently leases the location on a month-to-month basis at a rate of $2 per month.
(C) Energy Agreements
On February 21, 2011, the Company
entered into a service agreement with Duke Energy Carolinas, LLC. Effective, February 14, 2011 the Company agrees to produce and
sell to Duke Energy electric power. The term of this agreement is five years, and continuing thereafter until terminated by either
party upon giving ninety days written notice of termination. The Company will deliver to Duke Energy throughout the term of the
agreement approximately 9 kilowatts of energy during On-Peak periods.
On February 3, 2011, the Company
was selected to participate as solar energy supplier to the NC GreenPower program. As a result, NC GreenPower agrees to provide
a premium of $0.15 per kWh for energy generated and supplied to the electric grid. NC GreenPower agrees to provide this premium
for up to 14,309 kWh per year. This is a five year agreement.
|
NOTE 8
|
RELATED PARTY TRANSACTIONS
|
NC SOLAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2014
For the eleven months ended
March 31, 2014, two shareholders of the Company contributed services having a fair value of $19,066 (See Note 6(C)).
For the year ended April 30,
2013, two shareholders of the Company contributed services having a fair value of $20,800 (See Note 6(C)).
For the year ended April 30,
2012 two shareholders of the Company contributed services having a fair value of $20,800 (See Note 6(C)).
For the period ended April 30,
2011 two shareholders of the Company contributed services having a fair value of $8,000 (See Note 6(C)).
On December 20, 2010, the Company
issued 5,000,000 shares of common stock to its founder having a fair value of $500 ($0.0001/share) in exchange for cash (See Note
6(B)).
On December 17, 2010, the Company
issued 2,500,000 shares of common stock to its founder having a fair value of $250 ($0.0001/share) in exchange for cash (See Note
6(B)).
In June 2012, the Company was
awarded a grant in the amount $18,695 under the American Recovery and Reinvestment Act of 2009 for the photovoltaic system placed
into service. The grant requires the Company to keep the system in place for 5 years and file annual usage reports. If the Company
fails to maintain the system or fails to file the annual report, the grant is refundable to the Internal Revenue Service at a prorated
amount over 5 years. The amount was recorded as a deferred Federal grant and will be recognized over 5 years on the anniversary
date of the award. As of March 31, 2014, the Company has a deferred Federal grant of $11,217 and has recognized $7,478 of the grant
as other income.
On February 4, 2014, a company
entered into a non-binding letter of intent to acquire 83.78% of our issued and outstanding shares of common stock and to close
the transaction no later than March 14, 2014. The letter of intent calls for a deposit of $75,000 as a commitment fee.
The initial $50,000 was received on February 4, 2014, upon the execution of the agreement, and $25,000 was received on March 3,
2014. On April 4, 2014, the Company entered into a settlement and release agreement and agreed not to proceed with
the transaction. The Company returned $50,000 to the purchaser and the remaining $25,000 was recorded as other income by
the Company as liquidated damages.
As reflected in the accompanying
financial statements, the Company is in the development stage with no operations, used cash since inception of $146,113 and has
a net loss since inception of $382,198. This raises substantial doubt about its ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement
its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
Management believes that actions
presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to
continue as a going concern.
Subsequent to March 31, 2014,
the former shareholders of the Company paid accounts payable on behalf of the Company totaling $86,881 and operating expenses of
$14,918 which was recorded as an in-kind contribution of capital.
Subsequent to March 31, 2014,
the unsecured promissory note in the amount of $8,000 was forgiven by the note holder. The amount was subsequently recorded as
a gain on settlement of debt.
On
June 6, 2014, Jeffery Alt and Matthew Croslis resigned as officers and Mr. Croslis resigned as a member of the Board. Mr. Alt is
still a member of the Board.
Simultaneously, the Board of Directors
appointed Tadashi Ishikawa as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and the member
of the Board of Directors.
On June 6, 2014, the Board
of Directors approved a change in the Company’s fiscal year end from April 30 to March 31.
On August 1, 2011 the Company
entered into a consulting agreement to receive administrative and other miscellaneous services. The agreement was terminated effective
June 19, 2014.