UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
|
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended |
September 30, 2015 |
|
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from |
|
to |
|
Commission File Number |
000-54323 |
REDHAWK HOLDINGS CORP. |
(Exact name of registrant as specified in its charter) |
Nevada |
|
20-3866475 |
(State or other jurisdiction of incorporation or organization) |
|
(IRS Employer Identification No.) |
219 Chemin Metairie Road, Youngsville, Louisiana |
|
70592 |
(Address of principal executive offices) |
|
(Zip Code) |
(337) 269-5933 |
(Registrant’s telephone number, including area code) |
|
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
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.
x YES ¨ NO
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
x YES ¨ NO
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated
filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
¨ |
Accelerated filer ¨ |
|
Non-accelerated filer |
¨ |
(Do not check if a smaller reporting company) |
Smaller reporting company x |
|
|
|
|
|
|
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act)
¨ YES x NO
RedHawk Holdings Corp. had 365,094,082
shares of its common stock issued and outstanding as of November 15, 2015.
REDHAWK HOLDINGS CORP.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial
Statements
RedHawk Holdings Corp.
September 30, 2015
Index
REDHAWK HOLDINGS CORP.
Consolidated Balance
Sheets
(unaudited)
| |
September 30, | | |
June 30, | |
| |
2015 | | |
2015 | |
| |
| | | |
| | |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Current Assets: | |
| | | |
| | |
Cash | |
$ | 1,112 | | |
$ | 900 | |
Accounts receivable | |
| 4,860 | | |
| 610 | |
Inventory, at cost | |
| 9,756 | | |
| 9,756 | |
Prepaid expenses | |
| 35,876 | | |
| - | |
Total Current Assets | |
| 51,604 | | |
| 11,266 | |
| |
| | | |
| | |
Intangible asset, net of
amortization of $103,246 and $86,080, respectively | |
| 217,185 | | |
| 234,351 | |
| |
| | | |
| | |
Total Assets | |
$ | 268,789 | | |
$ | 245,617 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 155,049 | | |
$ | 87,980 | |
Due to related party | |
| 57,388 | | |
| 28,635 | |
Loans payable | |
| 156,697 | | |
| 156,697 | |
Insurance notes payable | |
| 25,754 | | |
| - | |
Total Liabilities | |
| 394,888 | | |
| 273,312 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| - | | |
| - | |
| |
| | | |
| | |
Stockholders' Equity (Deficit): | |
| | | |
| | |
Common Stock, par value of $0.001 per share, 375,000,000 authorized shares and 360,094,082 issued and outstanding | |
| 360,094 | | |
| 360,094 | |
Additional paid-in capital | |
| 937,826 | | |
| 927,826 | |
Accumulated deficit | |
| (1,424,019 | ) | |
| (1,315,615 | ) |
Total Stockholders' Deficit | |
| (126,099 | ) | |
| (27,695 | ) |
| |
| | | |
| | |
Total Liabilities and Stockholders' Equity | |
$ | 268,789 | | |
$ | 245,617 | |
The accompanying notes are an integral
part of these consolidated financial statements
REDHAWK HOLDINGS CORP.
Consolidated Statements of
Operations
(unaudited)
| |
Three Months Ended September 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Revenue | |
$ | 4,750 | | |
$ | - | |
| |
| | | |
| | |
Operating Expenses: | |
| | | |
| | |
Professional fees | |
| 61,150 | | |
| - | |
Management fees | |
| 21,500 | | |
| 42,500 | |
Amortization of intangibles | |
| 17,166 | | |
| - | |
General and administrative | |
| 13,338 | | |
| 4,115 | |
| |
| | | |
| | |
Total Operating Expenses | |
| 113,154 | | |
| 46,615 | |
| |
| | | |
| | |
Net Loss from Continuing Operations | |
| (108,404 | ) | |
| (46,615 | ) |
| |
| | | |
| | |
Discontinued Operations | |
| | | |
| | |
Income from discontinued operations | |
| - | | |
| 444 | |
| |
| | | |
| | |
Income on Discontinued Operations | |
| - | | |
| 444 | |
| |
| | | |
| | |
Net Loss and Comprehensive Loss | |
$ | (108,404 | ) | |
$ | (46,171 | ) |
| |
| | | |
| | |
Net Loss Per Share | |
| | | |
| | |
Basic | |
$ | - | | |
$ | - | |
Diluted | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Weighted Average Shares Outstanding | |
| | | |
| | |
Basic | |
| 360,094,082 | | |
| 345,188,164 | |
Diluted | |
| 360,094,082 | | |
| 345,188,164 | |
The accompanying notes are an integral
part of these consolidated financial statements
REDHAWK HOLDINGS CORP.
Consolidated Statements of Cash
Flows
(unaudited)
| |
Three Months Ended September 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Operating Activities: | |
| | | |
| | |
Net loss from continuing operations | |
$ | (108,404 | ) | |
$ | (46,171 | ) |
Adjustments
to reconcile net loss to net cash used in continuing operations: | |
| | | |
| | |
Amortization of intangibles | |
| 17,166 | | |
| - | |
Contributed services | |
| 10,000 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (4,250 | ) | |
| - | |
Prepaid expense and deposits | |
| (35,876 | ) | |
| - | |
Accounts payable and accrued liabilities | |
| 67,069 | | |
| (2,354 | ) |
Due to related party | |
| 28,753 | | |
| 45,850 | |
| |
| | | |
| | |
Net Cash Used in Operating Activities | |
| (25,542 | ) | |
| (2,675 | ) |
| |
| | | |
| | |
Financing Activities | |
| | | |
| | |
Proceeds from insurance note
payable | |
| 25,754 | | |
| - | |
| |
| | | |
| | |
Net Cash Provided by Financing Activities | |
| 25,754 | | |
| - | |
| |
| | | |
| | |
Increase (Decrease) in cash | |
| 212 | | |
| (2,675 | ) |
| |
| | | |
| | |
Cash, Beginning of Period | |
| 900 | | |
| 7,203 | |
| |
| | | |
| | |
Cash, End of Period | |
$ | 1,112 | | |
$ | 4,528 | |
| |
| | | |
| | |
Supplemental Disclosures: | |
| | | |
| | |
Interest paid | |
$ | - | | |
$ | - | |
Income tax paid | |
$ | - | | |
$ | - | |
The accompanying notes are an integral
part of these consolidated financial statements
REDHAWK HOLDINGS CORP.
Notes to the Consolidated Financial Statements
1. Nature of Operations and Continuance of Business
RedHawk Holdings
Corp. (“We” or "Company") (formerly Independence Energy Corp.) was incorporated in the State of Nevada
on November 30, 2005 under the name “Oliver Creek Resources Inc.” At inception, we were organized to
acquire, explore and develop natural resource properties in the United States. Effective August 12, 2008, we
changed our name from Oliver Creek Resources Inc. to “Independence Energy Corp.” and opened for trading with
the Over-the Counter Bulletin Board under the symbol “IDNG” and by vote of a majority of the Company’s
shareholders, the Company’s name was changed again to RedHawk Holdings Corp. effective on October 13, 2015.
On March 31, 2014, the Company acquired
the exclusive right to distribute certain medical products and changed the focus of its operations to include medical products
distribution. Since then we have expanded our operations to include specialized financial services and commercial real estate.
We may explore other lines of business in the future including, but not limited to, oil and gas services and technology.
In June 2014, the Company decided
to discontinue its oil and gas operations.
Going Concern
These financial statements have
been prepared on a going concern basis, which implies that the Company will be able to continue as a going concern without further
financing. Currently, the Company must continue to realize its assets to discharge its liabilities in the normal course of business.
The Company has generated minimal revenues to date and has never paid any dividends and is unlikely to pay dividends or generate
significant earnings in the immediate or foreseeable future.
As of September 30, 2015, the
Company had a working capital deficit of $343,284 and an accumulated deficit of $1,424,019. The continuation of the Company
as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or
debt financing, and the attainment of profitable operations from the Company's businesses. These factors raise substantial
doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any
adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
2. Summary of Significant Accounting Policies
The unaudited interim
condensed financial statements of the Company as of September 30, 2015 and for the three month periods ended September 30,
2015 and 2014 included herein, have been prepared in accordance with accounting principles generally accepted in the United
States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). The year-end condensed balance sheet dated as of June 30, 2015 is
also unaudited and is presented here as a basis for comparison and reflective of our transition period balance sheet for our
new year end which was changed on June 15, 2015. The Company’s fiscal year-end was January 31 but has been
changed to June 30 by vote of a majority of the Company’s board of directors. Although the financial statements and
related information included herein have been prepared without audit, and certain information and note disclosures normally
included in financial statements prepared in accordance with GAAP have been condensed or omitted, the Company believes that
the note disclosures are adequate to make the information presented not misleading. These unaudited condensed financial
statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes
thereto included in the Company’s Annual Report on Form 10-K as of January 31, 2015. In the opinion of
management, the unaudited interim financial statements included herein reflect all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of
operations, and cash flows for the periods presented. The results of operations for interim periods are not necessarily
indicative of the results expected for the full year or any future period.
The financial statements and related notes are prepared in conformity
with GAAP which requires management to make estimates and assumptions that affect the 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. The Company regularly evaluates estimates and assumptions related to valuation and impairment
of long-lived assets, asset retirement obligations, fair value of share-based payments, and deferred income tax asset valuation
allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that
it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual
results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there
are material differences between the estimates and the actual results, future results of operations will be affected.
REDHAWK HOLDINGS CORP.
Notes to the Consolidated Financial Statements
| c) | Basic and Diluted Net Loss Per Share |
The Company computes net loss per
share in accordance with Accounting Standard Codification (“ASC”) 260, Earnings Per Share, which 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 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. As of September 30, 2015, the Company had 7,452,959 potentially
dilutive shares. There were no potentially dilutive shares outstanding at September 30, 2014.
| d) | Oil and Gas Property Costs |
During the year ended January 31,
2015, the Company decided to discontinue its oil and gas business and the relevant assets have been impaired. In June 2015, the
Company assigned its interest in the Quinlan wells to the operator of those wells in exchange for the cancellation of all amounts
due to the operator, including any future liabilities related to the Quinlan wells.
Accounts receivables are amounts due from customers of our medical
products division and our financial services division. The amount is reported at fair value, net of any expected allowance for bad
debts.
Inventory consist of purchased thermometers held for resale
and are stated at the lower of cost or market utilizing the first-in, first-out method.
Potential benefits of income
tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, Income
Taxes, as of its inception. Pursuant to ASC 740, the Company is 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. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense in the
period they are incurred. The Company does not believe that it has any uncertain tax positions.
REDHAWK HOLDINGS CORP.
Notes to the Consolidated Financial Statements
ASC 220, Comprehensive
Income, establishes standards for the reporting and display of comprehensive loss and its components in the
financial statements. During the three month periods ended September 30, 2015 and 2014, the Company had no
items that represented comprehensive income (loss) and, therefore, did not include a schedule of comprehensive income (loss)
in the financial statements.
Pursuant to ASC 820, Fair Value
Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence
surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy
is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into
three levels that may be used to measure fair value:
Level
1
Level 1 applies to assets or liabilities
for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities
for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities
for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities.
The Company’s financial instruments
consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820
and ASC 825, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in
active markets for identical assets.
We believe that the recorded values
of all of our other financial instruments approximate their current fair values because of their nature and respective maturity
dates or durations.
Certain financial statement items
may have been reclassified to conform to current period financial reporting requirements. These reclassifications had no effect
on total assets, liabilities, equity or net loss.
| m) | Recent Accounting Pronouncements |
REDHAWK HOLDINGS CORP.
Notes to the Consolidated Financial Statements
Development
Stage
The Company has
limited operations and is considered to be in the development stage. During the year ended January 31, 2015, the
Company elected to early adopt Accounting Standards Update (“ASU”) No. 2014-10, Development Stage Entities
(Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to
remove the inception to date information and all references to development stage.
Revenue Recognition
In May 2014, the Financial
Accounting Standards Board ("FASB") issued new guidance intended to change the criteria for recognition of revenue.
The new guidance establishes a single revenue recognition model for all contracts with customers, eliminates industry
specific requirements and expands disclosure requirements. The core principle of the guidance is that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core
principle, an entity should apply the following five steps: (1) identify contracts with customers, (2) identify the
performance obligations in the contracts, (3) determine the transaction price, (4) allocate the transaction price to the
performance obligation in the contract, and (5) recognize revenue as the entity satisfies performance obligations. The
amendments are effective for annual reporting periods beginning after December 15, 2017, including interim periods within
that reporting period. Early application is permitted for annual reporting periods beginning after December 15,
2016, including interim periods within that reporting period. We are currently evaluating what impact adoption of this guidance
would have on our financial position, results of operations, cash flows and disclosures.
Going Concern
In August 2014, the FASB
issued guidance on disclosures of uncertainties about an entity's ability to continue as a going concern. The guidance
requires management's evaluation of whether there are conditions or events that raise substantial doubt about the entity's
ability to continue as a going concern within one year after the date that the financial statements are issued. This
assessment must be made in connection with preparing financial statements for each annual and interim reporting period.
Management's evaluation should be based on the relevant conditions and events that are known and reasonably knowable at the
date the financial statements are issued. If conditions or events raise substantial doubt about the entity's ability to
continue as a going concern, but this doubt is alleviated by management's plans, the entity should disclose information that
enables the reader to understand what the conditions or events are, management's evaluation of those conditions or events and
management's plans that alleviate that substantial doubt. If conditions or events raise substantial doubt and the substantial
doubt is not alleviated, the entity must disclose this in the footnotes. The entity must also disclose information that
enables the reader to understand what the conditions or events are, management's evaluation of those conditions or events and
management's plans that are intended to alleviate that substantial doubt. The amendments are effective for annual periods and
interim periods within those annual periods beginning after December 15, 2016. We do not expect that adoption will have a
material impact on our financial position, results of operations, cash flows or disclosures.
Debt Issuance Costs
In April 2015, the FASB issued new guidance which requires debt issuance costs to be presented in the
balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation
of a debt discount. The new guidance does not affect the recognition and measurement of debt issuance costs. Therefore,
the amortization of such costs will continue to be calculated using the interest method and be reported as interest expense.
The new guidance does not specifically address, and therefore does not affect, the balance sheet presentation of debt issuance
costs for revolving debt arrangements. The new guidance is effective for financial statements issued in fiscal years beginning
after December 15, 2015, and will be applied on a retrospective basis. Early adoption is permitted for financial statements
that have not been previously issued.
| n) | New Accounting Pronouncements |
The Company does not believe
that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated
financial statements.
Oil and Gas Properties
Effective June 1, 2015, we assigned 100% of
our interest in the Quinlan wells to the operator of those wells in exchange for the cancellation of all current and future liabilities
on the Quinlan wells.
REDHAWK HOLDINGS CORP.
Notes to the Consolidated Financial Statements
On March 31, 2014, the Company entered
into an asset purchase agreement (the “Agreement”) with American Medical Distributors, LLC (“AMD”) pursuant
to which the Company acquired a five year license dated November 27, 2013 for the exclusive territorial distribution rights to
the Thermofinder non-contact thermometer from AMD in exchange for the issuance of 152,172,287 shares of the Company’s common
stock with a fair value of $320,431 based on the fair value of such shares on the date of issuance. As a part of this asset acquisition
and share issuance, the Company also received a payment of $60,000. The intangible asset is being amortized over the remaining
life of the license agreement. Amortization expense is expected to be approximately $68,664 per year for the years ending 2016
through 2018 and approximately $57,219 in year 2019.
In December 2011, the Company received
a loan in the amount of $156,697 from an unrelated third party. The loan is non-interest bearing, unsecured and due on demand.
From
time to time, advances are received from a related party, who is a shareholder and officer of the Company, that are used to
fund operations. The total amount outstanding at September 30, 2015 and June 30, 2015 was $57,388 and $28,635,
respectively (See Note 9).
REDHAWK HOLDINGS CORP.
Notes to the Consolidated Financial Statements
| 7. | Discontinued Operations |
On June 23, 2014, the Company impaired
its remaining oil and natural gas properties and changed its focus to medical products distribution and other businesses. The
Company’s oil and gas properties have been classified as held for sale and are reflected at the estimated fair value expected
to be realized by the Company. As a result of the Company’s impairment of its oil and gas properties and change in direction
for the Company’s business, all expenses related to the oil and natural gas operations have been classified as discontinued
operations.
The results of discontinued operations
are summarized as follows:
| |
For the
Three Months Ended September 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Operating Income | |
$ | - | | |
$ | 444 | |
| |
| | | |
| | |
Net Income from
Discontinued Operations | |
$ | - | | |
$ | 444 | |
As of January 31, 2015, the Company has
$986,035 of net operating losses carried forward to offset taxable income in future years which expire commencing in fiscal
2026 and run through 2035. The Company has increased those available net operating losses to offset future taxable
income by $105,615 for the five month period ended June 30, 2015 and an additional $98,404 for the three month period ended
September 30, 2015. The income tax benefit differs from the amount computed by applying the US federal income tax rate of 34%
due to a valuation allowance established for the fair value of the tax benefit generated which is discussed in more detail
below to net loss before income taxes. At September 30, 2015, the Company had no uncertain tax positions.
The Company accounts for interest and penalties
relating to uncertain tax provisions in the current period statement of income, as necessary. The Company has never filed a tax
return. In order to utilize the available net operating loss carryforwards, the Company will need to prepare and file all tax returns
since its inception. The Company’s tax years from inception are subject to examination.
Due to the uncertainty surrounding the realization
of the deferred tax assets in future years, management has determined that it is more than likely than not that the deferred tax
assets will be not realized in future periods. Accordingly, the Company has recorded a valuation allowance against its net deferred
tax assets. As of September 30, 2015, the cumulative net operating loss carried forward is $1,190,054 or a net tax asset of $404,618,
which has been fully allowed for and increased by $33,457 due to the tax loss generated during for the three month period ended
September 30, 2015.
Effective
on October 13, 2015, we amended and restated our articles of incorporation as previously adopted by a majority vote of our shareholders.
The amended and restated articles of incorporation changed our name to RedHawk Holdings Corp., authorized 5,000 shares of Preferred
Stock, and increased authorized shares of common stock from 375,000,000 to 450,000,000, among other things.
On
October 15, 2015, we entered into a securities purchase agreement with an accredited investor for the sale of 5,000,000 shares of our common stock in exchange for $50,000 cash.
Pursuant
to a certificate of designation filed with the Nevada Secretary of State effective November 12, 2015, 2,000 shares of our
authorized Preferred Stock have been designated as Series A 5% Convertible Preferred Stock, with a $1,000 stated value
(“Series A Preferred”). The holders of the Series A Preferred are entitled to receive cumulative dividends at a
rate of 5% per annum, payable quarterly in cash, or at the Company’s option, such dividends shall be accreted to, and
increase, the stated value of the issued Series A Preferred (“PIK”). Holders of the Series A Preferred are
entitled to votes on all matters submitted to stockholders at a rate of ten votes for each share of common stock into which
the Series A Preferred may be converted. After six months from issue, each share of Series A Preferred is convertible, at the
option of the holder, into the number of shares of common stock equal to the quotient of the stated value, as adjusted for
PIK dividends, by $0.015, as adjusted for stock splits and dividends.
On
November 13, 2015, we acquired certain commercial real estate from a related party for $480,000 consisting of $75,000 in land costs
and $405,000 in buildings and improvements. The purchase price was paid by the Company assuming $265,000 of long-term bank indebtedness
(“Note”) plus the issuance of 215 shares of the Company’s newly designated Series A Preferred Stock. The purchase
price of the property was determined by independent third party appraisers commissioned by the financial institution providing
the long-term financing for the acquisition, plus the cost of specific security improvements requested by the lessee.
The
Note is dated November 13, 2015, in the amount of $265,000. Monthly payments under the Note are $1,962 including interest accruing
at a rate of 5.95% per annum. The Note matures in June 2021 and is secured by the commercial real estate, guarantees by the Company
and its real estate subsidiary and the personal guarantee of a shareholder.
Effective November 12, 2015, the
Company entered into a $100,000 Commercial Note Line of Credit (“Line of Credit”) with a shareholder to evidence
prior indebtedness and provide for future borrowings. The Line of Credit accrues interest at 5% per annum and matures on
October 31, 2016. At maturity, or in connection with a pre-payment, subject to the conditions set forth in the Line of Credit,
the shareholder has the right to convert the amount outstanding (or the amount of the prepayment), into the Company’s Series
A Preferred Stock at the par value of $1,000 per share. The amount due to related party at November 12, 2015 was converted
to the line of credit (See Note 6).
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of
Financial Condition and Results of Operations contains forward-looking statements. Forward-looking statements are all statements
other than statements of historical facts. The words “may,” “can,” “will” “should,”
“plans,” “believes,” “estimates,” “expects,” “projects,” “targets,”
“intends,” “potential,” “proposed,” and any similar expressions are intended to identify those
assertions as forward-looking statements. Investors are cautioned that forward-looking statements are predictions and are inherently
uncertain. Actual performance and results may differ materially from that projected or suggested herein due to certain risks and
uncertainties. In evaluating forward-looking statements, you should consider the various factors which may cause actual results
to differ materially from any forward-looking statements including the risks below and those listed in the “Risk Factors”
section of our latest 10-K report:
|
· |
Changes in the effects of the significant level of competition that exists in the medical device distribution industry, or our inability to attract customers for other reasons. |
|
· |
The unexpected cost of regulation applicable to our industry, and the possibility of future additional regulation. |
|
· |
Our lack of insurance coverage in the event we incur an unexpected liability. |
|
· |
Our lack of a proven operating history and the possibility of future losses that are greater than we currently anticipate. |
|
· |
The possibility that we may not be able to generate revenues or access other financing sources necessary to operate our business. |
|
· |
Our inability to attract necessary personnel to run and market our business. |
|
· |
The volatility of our stock price. |
|
· |
Changes in the market prices for our products, or our failure to perform or renew the distribution agreement for our products. |
|
· |
Our failure to execute our growth strategy or enter into other lines of business that we may identify as potentially profitable for our company. |
|
· |
Changes in economic and business conditions. |
|
· |
Changes in accounting policies and practices we may voluntarily adopt or that we may be required to adopt under generally accepted accounting principles in the United States. |
Although we believe that the exceptions reflected
in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
We undertake no obligation to revise or update any forward-looking statements.
Working Capital
|
|
September 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2015 |
|
Current Assets |
|
$ |
51,604 |
|
|
$ |
11,266 |
|
Current Liabilities |
|
$ |
394,888 |
|
|
$ |
273,312 |
|
Working Capital (Deficit) |
|
$ |
(343,284 |
) |
|
$ |
(262,046 |
) |
Operating Revenues
For the period from November
30, 2005 (date of inception) to September 30, 2015, our company has earned only minimal operating revenues.
Operating Expenses and Loss from Continuing
Operations
For the three months ended
September 30, 2015, we incurred a $108,404 loss from continuing operations or $nil per share compared with a loss from continuing
operations of $46,615 or $nil per share for the three months ended September 30, 2014.
Operating expenses for
the three months ended September 30, 2015 were $113,154 compared with $46,615 for the three months ended September 30, 2014. The
increase of $66,539 was due principally to a $17,166 increase in amortization, a $61,150 increase in professional fees and a $9,223
increase in general and administrative expenses. These increase were partially offset by a $21,000 reduction in management fees.
The increase in amortization expense related to the intangible asset acquired from AMD. The higher professional fees resulted primarily
from higher legal costs associated with various transactional costs and regulatory filing. The higher general and administrative
costs were related to increase costs associated with regulatory filing and additional insurance expense. These increase were partially
offset with a decrease in management fees resulting primarily from the resignation and dismissal of certain of our prior executives.
Liquidity and Capital Resources
As of September 30, 2015,
we had cash of $1,112 compared with $900 at June 30, 2015. During the three month period ended September 30, 2015 we focused on
reducing cash outlays for operating costs including management and consulting and fees. These reductions were offset by higher
professional fees associated with transactional costs and regulatory filings.
We had total assets
at September 30, 2015 of $268,789 compared with $245,617 at June 30, 2015. The increase in overall assets was due to the
increase in prepaid expenses.
At September
30, 2015, we had total liabilities of $394,888 compared with $273,312 at June 30, 2015. The increase in total liabilities was
due a $67,069 increase in our accounts payable and accrued liablities, a $28,753 increases in advances from a stockholder
and a $25,754 increase in increase in insurance notes payable. These increases were partially offset with the decrease
in liabilities related to certain discontinued operations.
Cash Flows
| |
Three months ended September 30, | |
| |
2015 | | |
2014 | |
Cash Flows used in Operating Activities | |
$ | (25,542 | ) | |
$ | (2,675 | ) |
Cash provided by Financing Activities | |
$ | 25,754 | | |
$ | - | |
Net Increase (decrease) in Cash During Period | |
$ | 212 | | |
$ | (2,675 | ) |
Cash Flow from Operating Activities
During the three
months ended September 30, 2015, cash of $25,542 was used in operating activities compared with $2,675 used during the same
three month period ended September 30, 2014. For the 2015 three month period, a $67,069 increase in accounts payable,
a $28,753 increase in amounts due to a related party, a $10,000 non-cash compensation expense, and a $17,166 non-cash
intangible amortization charge partially offset the $108,404 net loss for the period and increases of $4,250 and $35,876 in
accounts receivable and prepaid expenses, respectively.
The decrease in cash
used for operating activities during the three month period ended September 30, 2014, was attributed a significant reduction
in day-to-day general and administrative expenses for our Company which was partially offset by our payables and amounts due
to a related party.
Going Concern
We have not attained profitable
operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our
Independent Registered Public Accounting firm stated in their report on our audited financial statements as of January 31, 2015
that they have substantial doubt that we will be able to continue as a going concern without further financing.
Off-Balance Sheet Arrangements
We have no significant
off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to stockholders.
Future Financings
We will continue
to rely on financial support from our stockholders and our ability to raise equity capital or debt financing in order
to continue to fund our business operations. Issuances of additional shares and debt instruments convertible into shares of
our stock will result in dilution to existing stockholders. There is no assurance that we will achieve any additional
sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.
Use of Estimates and Critical
Accounting Policies
Our financial statements
and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods.
We regularly evaluate the
accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included
in the notes to our financial statements. In general, management's estimates are based on historical experience, on information
from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.
Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
We have implemented
all new accounting pronouncements that are in effect and applicable to us. These pronouncements did not have any material
impact on the financial statements unless otherwise disclosed, and we do not believe that there are any other new
accounting pronouncements that have been issued that might have a material impact on our financial position or results
of operations.
| Item 3. | Quantitative and Qualitative Disclosures About Market
Risk |
As a smaller reporting
company, we are not required to provide the information under this item.
| Item 4. | Controls and Procedures |
Management's Report on Disclosure Controls
and Procedures
The Company maintains disclosure
controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed
under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated
to the Company’s management, including its chief executive officer and chief financial officer to allow for timely decisions
regarding required disclosure.
As of the end of the quarter
covered by this report, we carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure
controls and procedures. Based on the foregoing, the chief executive officer and chief financial officer concluded in light of
material weaknesses in our internal controls that the Company’s disclosure controls and procedures were not effective as
of the end of the period covered by this quarterly report.
Changes in Internal Control Over Financial
Reporting
During the period covered
by this report there were no changes in the Company’s internal control over financial reporting that materially affected,
or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
We know of no material,
existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation.
There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is a party
adverse to us or has a material interest adverse to our interest.
On August 5, 2015, the Company made application with the Financial Industry Regulatory Authority (FINRA) for permission to
change the Company's name and our ticker symbol from IDNG to HAWC. On October 13, 2015, we amended our articles of incorporation
with the Nevada Secretary of State to change the Company's name from Independence Energy Corp. to RedHawk Holdings Corp.
On
November 5, 2015, we received notice from FINRA that they declined our request as being "deficient and…necessary for
the protection of investors." The FINRA decision was based on previously resolved allegations against Daniel J. Schreiber,
the Company's Chief Executive Officer.
In March 2009, The Securities and Exchange Commission had filed a complaint against
Mr. Schreiber alleging, among other things, violations of Sections 17(a)(3) of the Securities Act of 1933. Mr. Schreiber vehemently
denied such allegations. In order to avoid protracted and expensive litigation, Mr. Schreiber, without admitting or denying
the allegations in the complaint, consented in January 2010 to the entry of a final consent judgment that, among other things,
enjoins Mr. Schreiber from any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933. Mr. Schreiber
and his legal counsel adamantly reject FINRA's determination as a basis for denying the Company's request for a name change
and intend to challenge this determination. Until we reach a final resolution of this matter with FINRA, we will continue
trading, for SEC purposes, under the name Independence Energy Corp. with the ticker symbol IDNG.
Exhibit
Number |
|
Description of Exhibit |
(3) |
|
Articles of Incorporation and Bylaws |
|
|
|
3.01 |
|
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form SB-2 filed on March 7, 2006) |
|
|
|
3.02 |
|
Bylaws (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form SB-2 filed on March 7, 2006) |
|
|
|
3.03 |
|
Certificate of Amendment filed on July 23, 2008 (incorporated by reference to Exhibit 3.02 to our Current Report on Form 8-K filed on August 14, 2008) |
|
|
|
3.04 |
|
Certificate of Change filed on July 23, 2008 (incorporated by reference to Exhibit 3.01 to our Current Report on Form 8-K filed on August 14, 2008) |
|
|
|
3.05 |
|
Certificate of Change filed on June 14, 2012 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on June 15, 2012) |
|
|
|
3.06 |
|
Amended and Restated Articles of Incorporation of RedHawk Holdings
Corp. filed October 12, 2015 (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on October
16, 2015). |
|
|
|
3.07 |
|
Certificate of Designation filed on November 12, 2015. (Incorporated by
reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 19, 2015). |
Exhibit
Number |
|
Description of Exhibit |
(10) |
|
Material Events |
|
|
|
10.1 |
|
Assignment dated June 1, 2015 (incorporated by reference to Exhibit 10.1
to our Current Report on Form 8-K filed on August 19, 2015). |
|
|
|
(31) |
|
Rule 13a-14(a) / 15d-14(a) Certifications |
|
|
|
31.1* |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer |
|
|
|
31.2* |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer. |
|
|
|
(32) |
|
Section 1350 Certifications |
|
|
|
32.1* |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer |
|
|
|
32.2* |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer. |
|
|
|
101 |
|
Interactive Data File |
|
|
|
101* |
|
Interactive Data File (Form 10-Q for the quarter ended September 30, 2015 furnished in XBRL). |
|
|
|
|
|
|
101.INS |
|
XBRL Instance Document |
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
SIGNATURES
In accordance with Section
13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
REDHAWK HOLDINGS CORP. |
|
(Registrant) |
|
|
Dated: November 23, 2015 |
/s/ Daniel J. Schreiber |
|
Daniel J. Schreiber |
|
Chief Executive Officer and Director |
|
(Principal Executive Officer) |
|
|
Dated: November 23, 2015 |
/s/ G. Darcy Klug |
|
G. Darcy Klug |
|
Chief Financial Officer |
|
(Principal Financial Officer and Principal Accounting Officer) |
EXHIBIT
31.1
CERTIFICATION
PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Daniel J. Schreiber, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of
Redhawk Holding Corp; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting. |
Date: November 23, 2015 |
|
|
|
/s/ Daniel J. Schreiber |
|
Daniel J. Schreiber |
|
Chief Executive Officer and Director |
|
(Principal Executive Officer) |
|
EXHIBIT
31.2
CERTIFICATION
PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, G. Darcy Klug, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of
Redhawk Holding Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting. |
Date: November 23, 2015
/s/ G. Darcy Klug |
|
G. Darcy Klug |
|
Chief Financial Officer |
|
(Principal Financial Officer and Principal Accounting Officer) |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Daniel J. Schreiber, hereby certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Quarterly Report on Form 10-Q of Redhawk Holding Corp. for the quarter ended September
30, 2015 (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of Redhawk Holding Corp. |
Dated: November 23, 2015 |
|
|
|
|
/s/ Daniel J. Schreiber |
|
|
Daniel J. Schreiber |
|
Chief Executive Officer and Director |
|
(Principal Executive Officer) |
|
Redhawk Holding Corp. |
A signed original of this
written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this written statement required by Section 906, has
been provided to RedHawk Holdings Corp. and will be retained by RedHawk Holdings Corp. and furnished
to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, G. Darcy Klug, hereby certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Quarterly Report on Form 10-Q of Redhawk Holding Corp. for the quarter ended September
30, 2015 (the
"Report") fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of Redhawk Holding Corp. |
Dated: November 23, 2015 |
|
|
|
|
/s/ G. Darcy Klug |
|
|
G. Darcy Klug |
|
Chief Financial Officer |
|
(Principal Financial Officer and Principal Accounting Officer) |
|
Redhawk Holding Corp. |
A signed original of this written statement
required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed
form within the electronic version of this written statement required by Section 906, has been provided to RedHawk Holdings Corp. and will be retained by RedHawk Holdings Corp. and furnished to the Securities and Exchange Commission or its staff upon
request.
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