Our financial statements and supplementary
data are included herein commencing on page 44.
Notes to the Consolidated Financial Statements
As of and for the Years Ended December 31,
2016 and 2015
(Audited)
NOTE 1. ORGANIZATION, OPERATIONS
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
SAFE LANE SYSTEMS, INC. (the “Company”),
was incorporated in the State of Colorado on September 10, 2013. The Company was formed to engage in the sale of traffic safety
equipment. The Company may also engage in any other business permitted by law, as designated by the Board of Directors of the Company.
During the second quarter of 2014 the Company secured a perpetual license to all of the intellectual property of Superior Traffic
Control in exchange for the issuance of nonvoting convertible stock in the company. In the second quarter of 2016 the Company determined
that license and related intellectual property should be written off as worthless due to problems with the engineering provided
and the inability to obtain meaningful sales. The Company redomiciled to become a Delaware Holding Corporation in September of
2016.
On September 22, 2016, the Company formed
two wholly owned subsidiaries, SLS Industrial, Inc and Southeastern Holdings, Inc. (both Delaware corporations).
On September 30, 2016, the Company merged
with SLS Industrial, Inc., which became the surviving entity. SLS Industrial, Inc. and Southeastern Holdings, Inc. then restructured
to a Delaware holdings structure, in which SLS Industrial, Inc., became a wholly owned subsidiary of Southeastern Holdings, Inc.
The Companies restructured under a plan of merger and reorganization, in which the then-outstanding 25,118,273 shares of common
stock, 10,000,000 shares of Class A Preferred Stock and 0 shares of Class B Preferred Stock would ultimately translate 1 for 1
to the same interests in Southeastern Holdings, Inc.
On December 1, 2016, the Company spun off
its wholly owned subsidiary, SLS Industrial, Inc., along with its assets and liabilities, leaving Southeastern Holdings, Inc. as
the only surviving entity. Immediately prior to the date of the spin-off, the subsidiary held fully impaired intellectual property
and owed net liabilities of $527,270, comprised of $415,000 of convertible debt, $30,178 of accrued unpaid interest on that debt
and $82,092 of accounts payable pertaining to professional fees. The Company effected the spinoff by transferring its entire equity
interest in SLS Industrial, Inc. in exchange for assuming $40,000 of the outstanding accounts payable and issuing payment of $1,000
cash to the buyer. As a result, the Company recognized a debt extinguishment gain of $486,270 in 2016.
The Company, Southeastern Holdings, Inc.,
is currently pursuing new business opportunities.
Fiscal year
-
The Company employs
a fiscal year ending December 31.
Basis of Presentation - The accompanying
financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial
information and the instructions to Form 10-K and Article 10 of Regulation S-X. In the opinion of the Company’s management,
the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations,
financial position and cash flows. All such adjustments are of a normal, recurring nature.
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
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Reclassifications - Certain amounts in
the prior period’s financial statements have been reclassified to conform to the current quarter’s presentation and
to correct prior period errors.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with an original maturity of three months or less as cash equivalents. As of December 31, 2016 and 2015, the Company
had cash and cash equivalents of $743 and $15,282, respectively.
Cash Flows - During the year period ending
December 31, 2016, the Company primarily utilized cash proceeds from an unsecured short term loan to fund its operations.
Cash flows used by operations for the period
ended December 31, 2016 and 2015 were $40,095 and $258,212, respectively.
SOUTHEASTERN HOLDINGS, INC.
Notes to the Consolidated Financial Statements
As of and for the Years Ended December 31,
2016 and 2015
(Audited)
Impairment of Long-life Assets
In accordance with ASC Topic 360, the Company
reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances
indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future
net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and
carrying amount of the asset. No impairment was deemed necessary as of December 31, 2015. However, as discussed in Note 1, the
Company subsequently determined that the patent sublicense was completely impaired, resulting in impairment expense of $1,562 for
2016.
Intangible Assets, Patents
During the second quarter of 2014 fiscal
year the Company acquired the exclusive license rights and intellectual property for the patent of the Kone General device which
expires July 2022. As payment for the license rights the company agreed to issue 22,768,273 shares of class B preferred, nonvoting
shares to the shareholders of the original license holders “Superior Traffic Controls”. The Company accounts for its
patent sub-license in accordance with ASC 350-30-30 “Intangibles – goodwill and other” and 805-50-30 and 805-50-15
related to “Business Combinations” by recognizing the fair value to the amount paid by the company for the asset at
the time of purchase. Since Safe Lanes Systems has a limited operating history management determined to use par value as the value
recognized for the transaction. Since the patent has a predetermined, finite life span, the cost of the asset will be recognized
on a straight line basis over the remaining life of the patent. In addition, each period the Company will evaluate the intangible
asset for impairment. As of December 31, 2015 no impairment was deemed necessary. However, as of December 31, 2016, the Company
determined the patent sublicense was completely impaired. Balances pertaining to the patent sublicense as of December 31, 2016
and 2015 were as follows:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Patents
|
|
$
|
–
|
|
|
$
|
2,277
|
|
Less: Accumulated Amortization
|
|
|
–
|
|
|
|
(566
|
)
|
|
|
$
|
–
|
|
|
$
|
1,711
|
|
Amortization expense for the year ended
December 31, 2016 and 2015 was $149 and $298 respectively.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
consisted of accrued interest of $0 and $14,942 at December 31, 2016 and December 31, 2015, respectively. Accounts payable and
accrued expenses pertaining to professional fees totaled $35,219 and $1,080 as of December 31, 2016 and 2015, respectively.
As of December 31, 2016 and 2015, accrued
expenses were $1,011 and $0, respectively and consisted of Delaware franchise taxes and various other fees and penalties associated
with the late filings.
During 2016 and 2015, the CEO advanced
$4,056 and $0, respectively for professional fees on behalf of the Company, resulting in related party advances due to the CEO
in the amounts of $4,056 and $0 as of December 31, 2016 and 2015, respectively.
Unsecured, short-term notes payable
The Company received funding in the form
of an informal loan from the original holder of the license to the Kone-General patent loan license agreement in the year ending
December 31, 2013. The company formalized an unsecured, short-term note at 4% from this group in the second quarter of 2014. As
of December 31, 2015 the Company had received total funding of $395,000 and through December 31, 2016 the Company received an additional
$20,000 in funding on this loan for a total of $415,000. The company recognized $12,178 in interest expense related to these loans
in the year ended December 31, 2016. These notes, totaling $415,000, were due to be repaid December 31, 2016 but were not repaid
at that time.
Immediately prior to the date of the spin-off,
the subsidiary held fully impaired intellectual property and owed net liabilities of $527,270, including $415,000 of this unsecured
convertible debt and $30,178 of accrued unpaid interest on the notes. The Company effected the spinoff by transferring its entire
equity interest in SLS Industrial, Inc. in exchange for assuming $40,000 of the outstanding accounts payable and issuing payment
of $1,000 cash to the buyer. As a result, the Company recognized a total debt extinguishment gain of $486,270 in 2016.
SOUTHEASTERN HOLDINGS, INC.
Notes to the Consolidated Financial Statements
As of and for the Years Ended December 31,
2016 and 2015
(Audited)
Convertible Notes Payable
In July 2016, the Company entered into
$7,500 of convertible notes, of which $1,500 were held by the CEO and $6,000 by the CEO’s friends and family. These notes
bear interest at 10% per annum, with accrual of interest commencing after December 31, 2016 and mature on December 31, 2018. The
agreement define a trigger event as the sale of preferred stock at a stated value of $100,000 and a material funding as $500,000.
Terms of the note permit the noteholders to convert the debt into 4.026% of the Company’s then-outstanding common stock any
time between the trigger event and a material funding. Any time on or after maturity, the noteholders may either call the debt
or elect to continue holding the debt at the 10% annual interest rate.
The Company evaluated the possibility that
a beneficial conversion feature or derivative liability may exist on these notes and concluded that the Company’s stock value
would render both features worthless or trivial and therefore did not record a beneficial conversion feature or derivative liability.
In December 2016, the Company issued payment
for $6,000 of these notes, leaving an outstanding balance of $1,500 due to the CEO as of December 31, 2016. As of and for the year
ended December 31, 2016, accrued interest and interest expense on these convertible notes was $0 and $0, all respectively.
Stockholders’ Equity
At December 31, 2016 and December 31, 2015,
the Company was authorized to issue 500,000,000 shares of common stock, $0.0001 par value per share. In addition, 10,000,000 shares
of Class A preferred super majority voting stock, $.0001 par value and 50,000,000 shares of Class B preferred, $.0001 par value
nonvoting convertible shares were authorized. All common stock shares have full dividend rights. However, it is not anticipated
that the Company will be declaring distributions in the foreseeable future.
Upon formation, the Company sold the founder
2,000,000 shares of $0.0001 par value common stock for $1,000 cash. Also upon formation, the Company paid the founder stock based
compensation for services rendered of 10,000,000 shares of $0.0001 par value class A preferred super majority voting stock. These
preferred shares have a stated value of par value of $0.0001. The holder of the Class Stock shall have the right to vote on any
matter with holders of Common Stock and may vote as required on any action, which Colorado law provides may or must be approved
by vote or consent of the holders of the specific series of voting preferred shares and the holders of common shares. The Record
Holders of the Class B Preferred Shares shall have that number of votes equal to that number of common shares which is not less
than 60% of the vote required to approve any action, which Colorado law provides may or must be approved by vote or consent of
the holders of other series of voting preferred shares and the holders of common shares or the holders of other securities entitled
to vote, if any.
Upon execution of a patent sublicense agreement
the Company issued 22,768,273 shares of its class B preferred convertible stock to a trustee on behalf of shareholders of the original
license agreement. These shares were convert into regular common stock when the company registering the underlying shares with
the SEC and listing of the shares on a recognized exchange. During the year ended December 31, 2015 all of these shares were retired
and common shares were issued on a 1 to 1 basis to replace them.
During the fourth quarter of 2015, the
Company issued 350,000 shares of common stock to various individuals in consideration of their services rendered in support of
the Company resulting in the company recognizing compensation expense of $35 based upon the declared par value of the Company’s
common stock since there has been no market price sale of the Companies stock as of this point.
In the third quarter of 2016 the Company
issued 14,881,727 shares to a trust to be disbursed at the trustee’s direction as insurance in lieu of purchasing D&O
insurance. As the Company has issued no stock for cash, the Company’s assets are inconsequential and there is no active market
for this stock, the Company determined that the stock’s value is inconsequential and valued the transaction based upon par
value of $.0001 per share, resulting in general and administrative expense of $1,488 during 2016.
Professional and contractor expenses
Professional and contractor expenses consisted
of $48,600 and $59,400, respectively, of contract management fees for the years ended December 31, 2016 and 2015, respectively.
The remaining $63,429 and $183,558, respectively, for the years ended December 31, 2016 and 2015 were related to other professional
services.
Stock Based Compensation
The Company accounts for share-based payments
pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based
awards based upon an assessment of the grant date fair value for stock. In the year ended December 31, 2015 all shares awarded
were valued at par value.
SOUTHEASTERN HOLDINGS, INC.
Notes to the Consolidated Financial Statements
As of and for the Years Ended December 31,
2016 and 2015
(Audited)
Stock compensation expense for stock options
is recognized over the vesting period of the award or expensed immediately under ASC 718 when stock is given for previous service
without further recourse.
The following table summarizes share-based
compensation expense recorded in selling, general and administrative expenses during each period presented:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Stock Issued
|
|
|
14,881,727
|
|
|
|
350,000
|
|
Total Share-Based Compensation Expense
|
|
$
|
1,488
|
|
|
$
|
35
|
|
Management determined that the value of
the stock was negligible, given no historical stock sales, no significant assets and the lack of a market for its common stock,
and therefore used the par value of $0.0001 to determine stock compensation expense.
Income Tax
Income taxes are accounted for under the
asset and liability method of ASC 740. Deferred tax assets and liabilities are recognized for net operating loss and other credit
carry forwards and 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 the tax effect of transactions are expected to be realized.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the
year that includes the enactment date.
Deferred tax assets are reduced by a full
valuation allowance since it is more likely than not that the amount will not be realized. Deferred tax assets and liabilities
are classified as current or noncurrent based on the classification of the underlying asset or liability giving rise to the temporary
difference or the expected date of utilization of the carry forwards.
The Company calculates taxes using a blended
tax rate of 34%. A summary of deferred tax assets is as follows:
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating losses
|
|
$
|
254,722
|
|
|
$
|
135,436
|
|
Deferred Tax Liabilities:
|
|
|
|
|
|
|
|
|
Depreciation, amortization, other
|
|
|
–
|
|
|
|
(152
|
)
|
Deferred tax asset
|
|
|
254,722
|
|
|
|
135,285
|
|
Less: valuation allowance
|
|
|
(254,722
|
)
|
|
|
(135,285
|
)
|
Deferred tax asset, net
|
|
|
–
|
|
|
|
–
|
|
The Company did not file its Delaware franchise
taxes for 2016, resulting in penalties and interest of $211. These are reflected in the accrued expense balance of $1,011 as of
December 31, 2016.
Gain on Extinguishment of Debt
Immediately prior to the spin-off on December
1, 2016, the subsidiary held fully impaired intellectual property and owed net liabilities of $527,270, comprised of $415,000 of
convertible debt, $30,178 of accrued unpaid interest on that debt and $82,092 of accounts payable pertaining to professional fees.
The Company effected the spinoff by transferring its entire equity interest in SLS Industrial, Inc. in exchange for assuming $40,000
of the outstanding accounts payable and issuing payment of $1,000 cash to the buyer. As a result, the Company recognized a debt
extinguishment gain of $486,270 in 2016, as follows:
Accounts payable
|
|
$
|
42,092
|
|
Short-term unsecured notes
|
|
|
415,000
|
|
Accrued interest on notes
|
|
|
30,178
|
|
Total liabilities transferred
|
|
|
487,270
|
|
Less: cash paid
|
|
|
(1,000
|
)
|
Gain on extinguishment of debt
|
|
$
|
486,270
|
|
SOUTHEASTERN HOLDINGS, INC.
Notes to the Consolidated Financial Statements
As of and for the Years Ended December 31,
2016 and 2015
(Audited)
Net Income (Loss) per share
The net income (loss) per share is computed
by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options,
and common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation
if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.
Revenue Recognition
Revenue is generated from the sale of its
product and is recognized on an accrual basis as earned once the product is shipped and collection has occurred. The company has
only had one sale which was processed through the e-commerce site amazon.com. When the sale was completed through their platform,
payment was received and the product was shipped. Upon shipment the revenue was recognized.
Revenue from licensing services is recognized
when the obligations to the client are fulfilled which is determined when particular milestones in the contract are achieved. Revenue
from Seminar fees is related to one day seminars and is recognized as earned at the completion of the seminar. All revenue is measured
at fair value.
Financial Instruments
The carrying amounts of cash and current
assets and liabilities approximate fair value because of the short-term maturity of these items. These fair value estimates are
subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect these estimates. Available for sale securities are recorded at current market
value as of the date of the report.
Going Concern and Management’s
Plans
As shown in the accompanying financial
statements as of December 31, 2016, the Company had cash reserves of only $743, an accumulated deficit of $46,844, no history of
generating revenue, and has incurred substantial operating losses, net of any non-cash GAAP- basis gains, such as extinguishment
of debt.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern, however, the above conditions raise substantial doubt
about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future
effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should
the Company be unable to continue as a going concern.
Recent Accounting Pronouncements
The Company has reviewed all recently issued
but not yet effective accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected
to cause a material impact on its financial condition or results of operations.
Related Party Transactions
The Company pays its Chief Executive Officer,
Paul Dickman through Mr. Dickman’s consulting company, Breakwater Finance, LLC. For the year ended December 31, 2016 and
December 31, 2015, management and accounting fees were $48,600 and $59,400 respectively.
During 2016 and 2015, the Company paid
$8,000 and $0, respectively, in consulting fees to a relative of the CEO for developing various aspects of the Company’s
business model and product.
SOUTHEASTERN HOLDINGS, INC.
Notes to the Consolidated Financial Statements
As of and for the Years Ended December 31,
2016 and 2015
(Audited)
During 2016 and 2015, the CEO advanced
the Company $4,056 and $0, respectively, for accrued advances due to him of $4,056 and $0 as of December 31, 2016 and 2015, respectively.
Mr. Dickman, who is also a greater-than-5%
shareholder, holds 10,000,000 shares of Class A Supervoting preferred stock, which effectively entitles him to at least 60% of
voting interests in any common shareholder vote.
Subsequent Events
In January 2018, the Company issued 125,000
shares of unrestricted stock to a consultant for professional services rendered.
Management has evaluated subsequent events
through the date of this filing, noting that there were no other material events requiring disclosure or adjustment.
EXHIBIT ONE
SAFE LANES SYSTEM
FINAL FINANCIAL STATEMENT AS OF SEPTEMBER
30, 2016
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Safe Lane Systems, Inc.
Balance Sheet
|
|
(unaudited)
|
|
|
(audited)
|
|
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
|
|
Restated
|
|
|
|
|
Assets
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,871
|
|
|
$
|
15,282
|
|
Total Current Assets
|
|
|
7,871
|
|
|
|
15,282
|
|
|
|
|
|
|
|
|
|
|
Non-current Assets
|
|
|
|
|
|
|
|
|
Patent Sublicense, net
|
|
|
–
|
|
|
|
1,831
|
|
Total Non-current Assets
|
|
|
–
|
|
|
|
1,831
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
7,871
|
|
|
$
|
17,113
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
|
42,092
|
|
|
|
1,080
|
|
Accrued Expense
|
|
|
11,308
|
|
|
|
–
|
|
Unsecured, short-term notes payable
|
|
|
415,000
|
|
|
|
395,000
|
|
Accrued interest
|
|
|
27,404
|
|
|
|
14,942
|
|
Total Current Liabilities
|
|
|
495,804
|
|
|
|
411,022
|
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
|
7,500
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
503,304
|
|
|
|
411,022
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Class A super voting preferred stock,
$0.0001 par value; 10,000,000 shares authorized, issued and outstanding
|
|
|
1,000
|
|
|
|
1,000
|
|
Class B non-voting preferred stock,
$0.0001 par value; 50,000,000 shares authorized; 0 and 0 issued and outstanding as of September 30, 2016 and December
31, 2015
|
|
|
–
|
|
|
|
–
|
|
Common Stock, $0.0001 par value: 500,000,000 shares
authorized, 40,000,000 and 25,118,273 issued and outstanding as of September 30, 2016 and December 31, 2015
|
|
|
2,512
|
|
|
|
2,512
|
|
Additional paid-in-capital
|
|
|
801
|
|
|
|
801
|
|
Accumulated earnings
|
|
|
(499,746
|
)
|
|
|
(398,222
|
)
|
Total Stockholders' Equity
|
|
|
(495,433
|
)
|
|
|
(393,909
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
7,871
|
|
|
$
|
17,113
|
|
See accompanying notes to financial statements.
Safe Lane Systems, Inc.
Statement of Operations
For the Three and Nine Months
Ended September 30, 2016 and 2015 (Unaudited)
|
|
Three Months
Ended September 30
|
|
|
Nine Months
Ended September 30
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
Restated
|
|
|
|
|
|
Restated
|
|
|
|
|
Ordinary Income/Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
1,725
|
|
Total Revenue
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General & administrative expense
|
|
|
2,868
|
|
|
|
11,012
|
|
|
|
3,669
|
|
|
|
16,033
|
|
Impairment expense
|
|
|
–
|
|
|
|
–
|
|
|
|
1,562
|
|
|
|
–
|
|
Professional & contract expense
|
|
|
20,400
|
|
|
|
56,755
|
|
|
|
83,710
|
|
|
|
172,486
|
|
Total Expense
|
|
|
23,268
|
|
|
|
67,767
|
|
|
|
89,062
|
|
|
|
188,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss) from Operations
|
|
|
(23,268
|
)
|
|
|
(67,767
|
)
|
|
|
(89,062
|
)
|
|
|
(186,794
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income/Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Amortization expense
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Interest expense
|
|
|
4,184
|
|
|
|
3,509
|
|
|
|
12,462
|
|
|
|
8,196
|
|
Total Other Income/Expense
|
|
|
4,184
|
|
|
|
3,509
|
|
|
|
12,462
|
|
|
|
8,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss)
|
|
$
|
(27,452
|
)
|
|
$
|
(71,276
|
)
|
|
$
|
(101,524
|
)
|
|
$
|
(194,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss) per share (basic and diluted)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
24,768,273
|
|
|
|
24,768,273
|
|
|
|
24,768,273
|
|
|
|
24,768,273
|
|
See accompanying notes to financial statements.
Safe Lane Systems, Inc.
Statement of Cash Flow
For the Nine Months Ended
September 30, 2016 and 2015 (Unaudited)
|
|
Nine Months Ended
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Restated
|
|
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
(101,524
|
)
|
|
$
|
(194,989
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
148
|
|
|
|
104
|
|
Impairment of intangible asset
|
|
|
1,562
|
|
|
|
–
|
|
Stock Based Compensation
|
|
|
–
|
|
|
|
–
|
|
Changes in operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
41,012
|
|
|
|
–
|
|
Accrued expense
|
|
|
11,308
|
|
|
|
–
|
|
Accrued interest expense
|
|
|
12,462
|
|
|
|
8,196
|
|
Net Cash Provided by (used for) Operating Activities
|
|
|
(34,911
|
)
|
|
|
(186,689
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities:
|
|
|
|
|
|
|
|
|
Superior Traffic Controls Loan
|
|
|
20,000
|
|
|
|
150,000
|
|
Short Term Loan
|
|
|
7,500
|
|
|
|
–
|
|
Net cash provided by Financing Activities
|
|
|
27,500
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
(7,411
|
)
|
|
|
(36,689
|
)
|
Cash at Beginning of Period
|
|
|
15,282
|
|
|
|
88,495
|
|
Cash at End of Period
|
|
$
|
7,871
|
|
|
$
|
51,806
|
|
See accompanying notes to financial statements.
SAFE LANES SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2016
NOTE 1. ORGANIZATION, OPERATIONS
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
SAFE LANES SYSTEMS, INC. (the “Company”),
was incorporated in the State of Colorado on September 10, 2013. The Company was formed to engage in the sale of traffic safety
equipment. The Company may also engage in any other business permitted by law, as designated by the Board of Directors of the Company.
During the second quarter of 2014 the Company secured a perpetual license to all of the intellectual property of Superior Traffic
Control in exchange for the issuance of nonvoting convertible stock in the company. In the second quarter of 2016 the Company determined
that license and related intellectual property should be written off as worthless due to problems with the engineering provided
and the inability to obtain meaningful sales. The Company was redomiciled to become a Delaware Holding Corporation in September
of 2016 and is currently pursuing new business opportunities.
Basis of Presentation - The accompanying financial
statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”)
and pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information and the instructions
to Form 10-Q and Article 10 of Regulation S-X. In the opinion of the Company’s management, the information contained herein
reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position and
cash flows. All such adjustments are of a normal, recurring nature.
Reclassifications - Certain amounts in the
prior period’s financial statements have been reclassified to conform to the current quarter’s presentation and to
correct prior period errors.
Cash and Cash Equivalents
Cash Flows - During the period ending September
30, 2016, the Company primarily utilized cash proceeds from an unsecured short term loan and proceeds from a convertible note payable
to fund its operations.
Cash flows used by operations for the period
ended September 30, 2016 and 2015 were $34,911 and $186,689 respectively.
The Company considers all highly liquid investments
with an original maturity of three months or less as cash equivalents. As of September 30, 2016, the Company had cash and cash
equivalents of $7,871 as compared to cash and cash equivalents of $15,282 as of December 31, 2015.
Impairment of Long-life Assets
In accordance with ASC Topic 360, the Company
reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances
indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future
net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and
carrying amount of the asset. No impairment was deemed necessary as of September 30, 2016 and December 31, 2015.
Intangible Assets, Patents
During the second quarter of 2014 fiscal year
the Company acquired the exclusive license rights and intellectual property for the patent of the Kone General device which expires
July 2022. As payment for the license rights the company agreed to issue 22,768,273 shares of class B preferred, nonvoting shares
to the shareholders of the original license holders “Superior Traffic Controls”. The Company accounts for its patent
sub-license in accordance with ASC 350-30-30 “Intangibles – goodwill and other” and 805-50-30 and 805-50-15 related
to “Business Combinations” by recognizing the fair value to the amount paid by the company for the asset at the time
of purchase. Since Safe Lanes Systems has a limited operating history management determined to use par value as the value recognized
for the transaction. Since the patent has a predetermined, finite life span, the cost of the asset will be recognized on a straight
line basis over the remaining life of the patent.
At the conclusion of each reporting period
the patent is evaluated for impairment. As of September 30, 2016 due to the lack of sales and determining that incomplete engineering
plans were provided the Company determined it should impair the entire remaining value of the intangible asset and at that time
the remaining value was of $1,562 was written off to impairment expense.
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
Patents
|
|
$
|
2,277
|
|
|
$
|
2,277
|
|
Less: Accumulated Amortization
|
|
|
(595
|
)
|
|
|
(446
|
)
|
Impairment
|
|
|
(1,682
|
)
|
|
|
–
|
|
|
|
$
|
–
|
|
|
$
|
1,831
|
|
Amortization expense for the NINE-month period ended September 30,
2016 and 2015 was $149 and $29 respectively.
Accounts payable and accrued liabilities
Accounts payable consisted of $42,092 at September
30, 2016 and $1,080 at December 31, 2015 respectively. Accrued expense consisted of $11,308 at September 30, 2016 and $0 at December
31, 2015 respectively. Accrued interest consisted of $27,404 at September 30, 2016 and $14,942 at December 31, 2015 respectively.
Unsecured, short-term notes payable
The company obtained an unsecured, short-term
note of $250,000 at 4% from the original holder of the license to the Kone-General patent in the second quarter of 2014. As of
September 30, 2016 the Company had received funding of $250,000 on the note payable and an additional $165,000 under the same terms
with a verbal agreement in place and had recognized $27,404 in accrued interest expense.
Convertible, long-term notes payable
The company obtained five unsecured, long-term
notes totaling $7,500 in the third quarter of 2016. The notes do not bear interest until December 31, 2016, after which they will
bear interest at 12% per year. The notes are due and payable December 31, 2017 but can be converted into the company’s common
stock at the holders request at any time before they are due. Each note will convert into approximately 4% of the companies then
outstanding common stock.
Stockholders’ Equity
At March 31, 2016 and December 31, 2015, the
Company was authorized to issue 500,000,000 shares of common stock, $0.0001 par value per share. In addition, 10,000,000 shares
of Class A preferred super majority voting stock, $.0001 par value and 50,000,000 shares of Class B preferred, $.0001 par value
nonvoting convertible shares were authorized. All common stock shares have full dividend rights. However, it is not anticipated
that the Company will be declaring distributions in the foreseeable future.
Upon formation, the Company sold the founder
2,000,000 shares of $0.0001 par value common stock for $1,000 cash. Also upon formation, the Company paid the founder stock based
compensation for services rendered of 10,000,000 shares of $0.0001 par value class A preferred super majority voting stock. These
preferred shares have a stated value of par value of $0.0001. The holder of the Class Stock shall have the right to vote on any
matter with holders of Common Stock and may vote as required on any action, which Colorado law provides may or must be approved
by vote or consent of the holders of the specific series of voting preferred shares and the holders of common shares. The Record
Holders of the Class B Preferred Shares shall have that number of votes equal to that number of common shares which is not less
than 60% of the vote required to approve any action, which Colorado law provides may or must be approved by vote or consent of
the holders of other series of voting preferred shares and the holders of common shares or the holders of other securities entitled
to vote, if any
Upon execution of a patent sublicense agreement
the Company issued 22,768,273 shares of its class B preferred convertible stock to a trustee on behalf of shareholders of the original
license agreement. These shares were converted into regular common stock upon the company registering the underlying shares with
the SEC and distribution to stockholders which occurred in the 2015 fiscal year.
In the last quarter of 2015 the Company issued
350,000 shares of stock to two contractors for past work. As the Company has issued no stock for cash the Company valued the compensation
based upon par value of $.0001 per share resulting in a compensation expense of $35 per share in the period the stock was issued.
Professional and contractor expenses
Professional and contractor expenses are comprised of the following
in the nine-month period ended September 30, 2016:
|
|
September 30,
2016
|
|
|
September 30,
2015
|
|
Contract Management Fees
|
|
$
|
48,600
|
|
|
$
|
48,600
|
|
Other Professional Services
|
|
|
35,110
|
|
|
|
123,886
|
|
|
|
$
|
83,710
|
|
|
$
|
172,486
|
|
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 statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Stock Based Compensation
The Company accounts for share-based payments
pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based
awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes
option pricing model.
Stock compensation expense for stock options
is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when options are given
for previous service without further recourse. The Company issued stock options to contractors that had been providing services
to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the
period issued because they were given as a form of compensation for services already rendered with no recourse.
The following table summarizes share-based
compensation expense recorded in selling, general and administrative expenses during each period presented:
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
Stock award
|
|
|
–
|
|
|
|
350,000
|
|
Total Share-Based Compensation Expense
|
|
$
|
–
|
|
|
$
|
35
|
|
In the last quarter of 2015 the Company issued
350,000 shares of stock to two contractors for past work. As the Company has issued no stock for cash the Company valued the compensation
based upon par value of $.001 per share resulting in a compensation expense of $35 per share in the period the stock was issued.
Stock option activity was as follows:
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price ($)
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
10,000,000
|
|
|
|
0.20
|
|
Granted
|
|
|
0
|
|
|
|
–
|
|
Exercised
|
|
|
0
|
|
|
|
–
|
|
Forfeited or expired
|
|
|
0
|
|
|
|
–
|
|
Balance at December 31, 2015
|
|
|
10,000,000
|
|
|
|
0.20
|
|
Granted
|
|
|
0
|
|
|
|
–
|
|
Exercised
|
|
|
0
|
|
|
|
–
|
|
Forfeited or expired
|
|
|
0
|
|
|
|
–
|
|
Balance at September 30, 2016
|
|
|
10,000,000
|
|
|
|
0.20
|
|
The following table presents information regarding
options outstanding and exercisable as of September 30, 2016:
Weighted average contractual remaining term - options outstanding
|
|
|
0.0 years
|
|
Aggregate intrinsic value - options outstanding
|
|
|
–
|
|
Warrants exercisable
|
|
|
10,000,000
|
|
Weighted average exercise price - options exercisable
|
|
$
|
0.20
|
|
The fair value of each option granted is estimated
on the date of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows:
Risk-free interest rate
|
0.01%
|
Expected life of options
|
4-5 years
|
Annualized volatility
|
144.00%
|
Dividend Income
|
0.00%
|
Income Tax
The Company accounts for income taxes under
Statement of Financial Accounting Standards No. 109 (“SFAS 109”). Under SFAS 109 deferred taxes are provided
on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will
not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date
of enactment.
Fiscal year
The Company employs a fiscal year ending December 31.
Net Income (Loss) per share
The net income (loss) per share is computed
by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and
common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation
if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.
Revenue Recognition
The Company is currently in the Development stage and has very limited
revenues. Revenue will be recognized on an accrual basis as earned once operations commence.
Financial Instruments
The carrying value of the Company’s financial
instruments, including cash and cash equivalents, as reported in the accompanying balance sheet, are stated at fair value.
Going Concern and Managements’ Plans
As shown in the accompanying financial statements
for the period ended September 30, 2016, the Company has a limited operating history.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern, however, the above conditions raise substantial doubt
about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible
future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result
should the Company be unable to continue as a going concern.
The Company has a plan in place to remove
this threat through the issuance of notes payable and common stocks offerings. If the Offering raises at least $250,000, then
the Company’s estimated expenses related to the Offering and the expenses related to initial projected operating costs of
the Company will be covered. However, the Company will need to generate more than the expenses of the Offering in order to have
enough capital to execute its business plan.
Recent Accounting Pronouncements
The Company has reviewed all recently issued
but not yet effective accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected
to cause a material impact on its financial condition or results of operations.
Related Party Transactions
The Company pays its Chief Executive Officer,
Paul Dickman through Mr. Dickman’s consulting company, Breakwater Finance, LLC. For the nine-month period ended September
30, 2016 and June 30, 2015, management fees were $48,600 and $48,600 respectively.
Subsequent Events
The Company evaluates events and transactions
after the balance sheet date but before the financial statements are issued. As of the date of this filing there were no events
that materially impacted the company.