Edge Data Solutions, Inc. - Quarter Report: 2018 June (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

For the quarterly period ended June 30, 2018

OR

For the transition period __________ to __________

Commission File Number: 333-198435

SOUTHEASTERN HOLDINGS, Inc.

(Exact name of registrant as specified in its charter)

19 Old Town Square, Suite #238, Fort Collins, CO 80524, (303) 968-9643

(Address and telephone number of principal executive offices)

Mr. Paul Dickman, CEO, (303) 968-9643

19 Old Town Square, Suite #238, Fort Collins, CO 80524

(Name, address and telephone number of agent for service)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ✓    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).    Yes  ☐     No  ✓  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No  ✓

As of August 14, 2018 there were outstanding 40,125,000 shares of the issuer’s common stock, par value $0.0001 per share, 10,000,000 shares of the issuer’s class A preferred stock, par value $0.0001 per share and 0 shares of the issuer’s class B preferred stock, par value $0.0001 per share. 

SOUTHEASTERN HOLDINGS, INC.

FORM 10-Q for the Quarter Ended June 30, 2018

INDEX

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Southeastern Holdings, Inc.

Balance Sheets

The accompanying notes are an integral part of the consolidated financial statements.

Southeastern Holdings, Inc.

Statements of Operations

The accompanying notes are an integral part of the consolidated financial statements.

Southeastern Holdings, Inc.

Statements of Cash Flows

The accompanying notes are an integral part of the consolidated financial statements.

SOUTHEASTERN HOLDINGS, INC.

NOTES TO THE FINANCIAL STATEMENTS

June 30, 2018 (UNAUDITED)

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 June 30, 2018, 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.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of six months or less as cash equivalents.

Cash Flows - During the period ending June 30, 2018, the Company relied on related party advances to fund operations.

Cash flows used by operations for the period ended June 30, 2018 and 2017 were $750 and $10, respectively.

As of June 30, 2018, the Company had cash and cash equivalents of $0, as compared to cash and cash equivalents of $733 as of December 31, 2017.

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. As discussed in Note 1, the Company determined that the patent sublicense was completely impaired as of December 31, 2016, resulting in impairment expense of $1,683 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. During 2016, the Company determined that the patent was completely impaired. The Company spun off its rights to the patents in the fourth quarter of 2016 in connection with the business spin-off.

Accounts payable and accrued liabilities

Accounts payable consisted of $74,934 at June 30, 2018 and $32,424 at December 31, 2017 respectively. Accrued interest consisted of $225 at June 30, 2018 and $150 at December 31, 2017, 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, 2017 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.

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, 2017 and mature on December 31, 2018. The agreements 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 notes 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 repaid $6,000 of these notes, leaving an outstanding balance of $1,500 due to the CEO as of each, June 30, 2018 and December 31, 2017. Interest expense on these notes totaled $75 and $38 for the six and three months ended June 30, 2018, respectively. Accrued interest outstanding on this debt was $225 and $150 as of June 30, 2018 and December 31, 2017, respectively.

Related Party Advances

From time to time, the Company’s CEO advances funds to pay for professional services on behalf of the Company. These advances are due on demand, have no set term and bear no interest. During the three months ended June 30, 2018 and 2017, the CEO advanced $0 and $0, respectively, and during the six months then ended, the CEO advanced $750 and $0 and the Company repaid the CEO $733 and $0, all respectively. As of June 30, 2018 and December 31, 2017, the balance due to the CEO was $8,323 and $8,306, respectively.

Stockholders’ Equity

At December 31, 2017 and December 31, 2016, 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, 2017 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. 

In January 2018, the Company issued 125,000 unrestricted common shares to a consultant for services rendered.

As of each June 30, 2018 and December 31, 2017, 40,125,000 common shares, 10,000,000 Class A Preferred Shares and 0 Class B Preferred shares were issued and outstanding.

Professional and contractor expenses

During the three and six months ended June 30, 2018 and 2017, the Company paid the CEO’s company $0 for contract management services. Remaining professional fees for the three and six months ended June 30, 2017 pertained to administrative functions, such as accounting, performed by third parties. Professional fees for the three and six months ended June 30, 2018, totaling $42,373 and $18,630, respectively pertained to auditing and accounting services.

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 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 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.

In January 2018, the Company issued 125,000 unrestricted common shares to a consultant for services rendered, resulting in $13 of stock-based compensation expense included in professional fees. The Company issued no options during the six and three months ended June 30, 2018 and 2017 and had no outstanding options as of June 30, 2018 or December 31, 2017.

Income Tax

The Company accounts for income taxes under ASC 740, “Income Taxes.” Under ASC 740, 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 pursuing new business opportunities and consequently has not produced revenues. The Should the Company generate revenues in the future, it will recognize such revenues in accordance with ASC 606, “Contracts with Customers.”

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 Management’s Plans

As shown in the accompanying financial statements as of June 30, 2018, the Company had no cash reserves, an accumulated deficit of $92,607, 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 three and six month periods ended June 30, 2018 and 2017, the Company paid no management fees.

In February 2018, the Company disbursed $733 to the CEO to repay related party advances, and the CEO paid $750 to a consultant for professional services on behalf of the Company.

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, management determined there were no other events requiring adjustment to or additional disclosure in the financial statements.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “should”, “likely” or similar expressions, indicates a forward-looking statement.

The identification in this report of factors that may affect our future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Safe Lane Systems, Inc. (“Safe Lane Systems”, “Safe Lane Systems,” “We,” “Us,” “Our,” or “Company” hereafter), was incorporated in the State of Colorado on September 10, 2013.  We were originally formed to engage in the sale of traffic safety equipment. We may also engage in any other business permitted by law, as designated by the Board of Directors of our Company.

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., leaving Southeastern Holdings 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 is currently evaluating new business opportunities. Though the company has not identified which opportunity it will pursue it is expected that it will by December 31, 2018.

Our Auditors have issued a going concern opinion and the reasons noted for issuing the opinion are our lack of revenues, insignificant cash compared to current liabilities and a lack of available capital. 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. New business opportunities may never emerge, and we may not be able to sufficiently fund the pursuit of new business opportunities should they arise.

As of June 30, 2018, we had approximately $733 in cash on hand. Our current monthly cash burn rate is approximately $500, and it is expected that burn rate will continue until significant additional capital is raised and our marketing plan is executed. While there is currently very modest cash burn, our trade creditors may call debts at any time, and our cash reserves would not be sufficient to satisfy all balances. We are currently dependent on minimal expenses to be covered by a loan or other cash infusion from the company’s chairman of the board and CEO, Mr. Dickman. There is no guarantee that this cash infusion will continue to be made.

Results of Operations

There were no revenues in the three and six months ended June 30, 2018 or 2017.

Net losses decreased from $22,107 in the three month period ended June 30, 2017 to $285 in the three month period ending June 30, 2018 and from $30,910 in the six month period ended June 30, 2017 to $480 in the six month period ended June 30, 2018. These decreases were primarily caused by a reduction in needs for professional services after the 2016 spinoff.

Liquidity and Capital Resources

During the six months ended June 30, 2018, the Company received no funding, as compared to funding through notes payable in the six months ended June 30, 2017.

During the twelve months ending June 30, 2018 the Company estimates it will need approximately $20,000 to pursue business opportunities. Other than the foregoing, the Company does not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on sales, revenues or income from continuing operations, or liquidity and capital resources.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of June 30, 2018, our disclosure controls and procedures were not effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2018 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

The Company is not a party to any legal proceeding that it believes will have a material adverse effect upon its business or financial position.

Item 1A. Risk Factors.

Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

There have been no defaults upon senior securities.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6.  Exhibits

a.  Exhibits

* To be filed by amendment.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.