RedHawk Holdings Corp. - Annual Report: 2018 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended June 30, 2018

OR

For the transition period from ____________to____________

Commission File No. 000-54323

RedHawk Holdings Corp.

(Exact Name of Registrant as Specified in Its Charter)

(Registrant’s Telephone Number, Including Area Code): (337) 269-5933

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

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 [X] 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 [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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

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

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on August 31, 2018 was approximately $493,634 based on the closing price of $0.0019 per share as reported on the OTCQB Markets. As of June 30, 2018, the registrant had 362,939,227 shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

REDHAWK HOLDINGS CORP.

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended June 30, 2018

Table of Contents

Cautionary Note About Forward-Looking Statements

This Annual Report on Form 10-K (which we refer to as this “Form 10-K”) contains forward-looking statements within the meaning of the federal securities laws. These statements relate to expectations, beliefs, projections, forecasts, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks listed below and described in “Part I, Item 1A. Risk Factors” in this Form 10-K, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements:

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we are not obligated to, and do not intend to, update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise. Therefore, you should not rely on these forward-looking statements as of any date subsequent to the date of this Form 10-K.

As used in this Form 10-K, references to “Company,” “we,” “us” or “our” refer to RedHawk Holdings Corp., a Nevada corporation, and, unless the context otherwise requires, its subsidiaries and affiliates.

PART I

ITEM 1. BUSINESS

General

We were incorporated in the State of Nevada on November 30, 2005 under the name “Oliver Creek Resources Inc.” At inception, we were an exploration stage company engaged in the acquisition, exploration and development of natural resources. In 2014, we discontinued our oil and gas operations and changed our business focus. Currently, we are a diversified holding company which, through our subsidiaries, is engaged in sales and distribution of medical devices, sales of branded generic pharmaceutical drugs, commercial real estate investment and leasing, sales of point of entry full-body security systems, and specialized financial services.

The Company, through its medical products business unit, manufactures and sells our Sharps and Needle Destruction Device (SANDD mini™) and our Carotid Artery Digital Non-Contact Thermometer. We also distribute for third parties WoundClot – Advanced Bleeding Control, the Thermofinder FS-700 Pro (professional model) and FS-700 (retail model) digital non-contact thermometers and Zonis®. The Company’s real estate leasing revenues are generated from a commercial property under a long-term lease. Additionally, the Company’s real estate investment unit holds limited liability company interest in a commercial restoration project in Hawaii. RedHawk Energy Corp., LLC holds the exclusive U.S. manufacturing and distribution rights for the Centri Controlled Entry System, a unique, closed cabinet, nominal dose transmission full body x-ray scanner.

Effective November 12, 2014, we completed a private equity funding with certain accredited investors pursuant to a Securities Purchase Agreement (“SPA”). Under the terms of the SPA, we sold 14,905,918 shares of our common stock in exchange for $50,000 ($0.0034 per share) in the aggregate. Additionally, in consideration of the purchase price, we granted warrants to acquire an additional 7,452,959 shares of our common stock over a two-year period at an aggregate exercise price of $0.0050 per share or gross proceeds of $37,265.

On July 31, 2015, by a vote of the majority of our shareholders, we changed our name from “Independence Energy Corp.” to “RedHawk Holdings Corp.” (hereafter referred to as RedHawk or the Company), increased the number of authorized shares of common stock to 450,000,000, and authorized the issuance of 5,000 shares of preferred stock with an initial stated value of $1,000 per share.

On December 31, 2015, the Company received from Beechwood Properties, LLC (which we refer to as “Beechwood”) a working capital injection of approximately $1.9 million of cash and marketable securities, net of an approximately $1.0 million line of credit with a 3.5% per annum interest rate. This infusion was received in exchange for 1,000 shares of the Company’s newly designated 5% Series B Convertible Preferred Stock, $1,000 stated value. Additionally, Beechwood converted into 100 shares of the Company’s 5% Series A Convertible Preferred Stock, $1,000 par value, $100,000 of the Company’s outstanding obligation to Beechwood. As of June 30, 2018, Beechwood beneficially controls approximately 79.3% of the voting control Company’s voting shares.

On February 1, 2016, we issued 250 shares of the Company’s 5% Series B Convertible Preferred stock, $1,000 stated value, to Thomas J. Concannon, our Chief Executive Officer in exchange for $250,000 in cash.

Additionally, on March 15, 2016, we issued approximately $550,000 of convertible promissory notes (“Fixed Rate Convertible Notes”). The Fixed Rate Convertible Notes are secured by certain Company real estate holdings. The Fixed Rate Convertible Notes mature on the fifth anniversary of the date of issuance and are convertible into shares of our common stock at a price of $0.015 per share. Interest accrues at a rate of 5% per annum and is payable semi-annually. Beginning 180 days after issuance of the Convertible Notes, the Company has the option to issue a notice of its intent to redeem, for cash, an amount equal to the sum of (a) 120% of the then outstanding principal balance, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Fixed Rate Convertible Notes. The Company may only issue the notice of its intent to redeem the Fixed Rate Convertible Notes if the trading average of the Company’s common stock equals or exceeds 300% of the conversion price during each of the five business days immediately preceding the date of the notice of intent to redeem. The holder of the Fixed Rate Convertible Notes has the right to convert all or any portion of the Convertible Notes at the conversion price at any time prior to redemption. At June 30, 2018 and including PIK interest, there were $621,411 ($537,757 net of deferred financing costs and beneficial conversion option) of Fixed Rate Convertible Notes outstanding which are convertible into our common stock at a conversion rate of $0.015 per share or 41,427,384 shares.

During the twelve months ended June 30, 2018, we also issued $468,000 of convertible notes to third parties with variable conversion rates (“Variable Rate Convertible Notes”). The Variable Rate Convertible Notes mature at various dates between November 2018 and 2019. We received, net of financing costs incurred, $403,350 in cash from the issuance of these notes. These Variable Rate Convertible Notes have interest accruing at rates ranging between 8% - 12%, due at redemption. These notes issued to third parties have a variable conversion rate based on the price of the Company’s common stock. $326,240 of the convertible notes are currently convertible into our common stock beginning in the quarter ending June 30, 2018 at a variable conversion rate. We also paid in full two convertible note in the amount of $88,000 and notes totaling $20,760 were converted into equity.

Approximately $360,000 of the Variable Rate Convertible Notes have maturity dates prior to June 30, 2019, but continue to be classified as noncurrent as the Company has been notified by the holders of their intent to convert such notes to common stock

CURRENT BUSINESS ACTIVITIES

Branded Generic Pharmaceuticals and Medical Device Sales and Distribution

Branded Generic Pharmaceuticals. On March 24, 2016, RedHawk Pharma UK Ltd (“RedHawk Pharma”), a wholly-owned subsidiary of RedHawk, signed a definitive agreement with Scarlett Pharma LTD (which we refer to as “Scarlett”) to complete the acquisition of a 25% ownership investment in EcoGen, a United Kingdom based company specializing in the manufacturing and marketing of certain branded generic pharmaceuticals and medical devices. In the year ended June 30, 2018, the Company entered into a share transfer agreement wherein RedHawk increased its ownership position in EcoGen to 75%, and then later, the Company reached an agreement with Scarlett and its affiliate wherein RedHawk further increased its ownership position in EcoGen to 100%.

Under the terms of the agreement, Scarlett and its affiliate agreed to surrender to the Company, 10 million shares of RedHawk’s outstanding common stock, transfer to RedHawk Pharma approximately $300,000 of EcoGen’s preferred stock plus other consideration in exchange for RedHawk Pharma assuming approximately $370,000 of obligations due to EcoGen.

A generic drug is a pharmaceutical drug that is the equivalent to a brand name product in dosage, strength, route of administration, quality, performance and intended use. The term may also refer to any drug marketed under its chemical name without advertising, or to the chemical makeup of a drug rather than the brand name under which the drug is sold. Although they may not be associated with a particular company, generic drugs are subject to government regulations in the countries where they are dispensed. They are labeled with the name of the manufacturer and the nonproprietary adopted name of the drug. A generic drug must contain the same active ingredients as the original brand name formulation. In most cases, generic drugs become available after the patent afforded to a drug’s original developer expires. Once generic drugs enter the market, competition often leads to substantially lower prices for both the brand name drug and its generic equivalents. Clinicians in the United Kingdom are encouraged to write prescriptions for patent protected drugs by their generic name in preparation for such drugs losing their patent protected status, with the prescribed drug being dispensed to the patient by a community pharmacy. Pharmacists are obligated by law to dispense the brand that is written, should the clinician not use the generic name when prescribing a particular treatment, with all drugs being dispensed against a set tariff pricing structure. The pharmacist therefore procures the generic drug at the lowest available price from the wholesale supply chain, who in turn procures the lowest priced drug from any available manufacturer, ensuring that the generic drug market in the United Kingdom is purely driven by cost. The legal obligation on United Kingdom pharmacists to dispense a branded product if that is so prescribed presents the opportunity for the branded generic strategy of EcoGen. With a portfolio of widely prescribed generic drugs listed as trademarked branded generics, EcoGen can offer significant budgetary savings when compared to standard generics by offering these branded generics for sale at a price below the listed generic tariff. With UK Commissioning Groups (“CCG’s) being driven to find savings across their budgets where possible, EcoGen’s branded generic strategy has been met favorably. Currently, we are currently selling our branded generic drugs to approximately five of the approximately 225 CCG’s through an exclusive distribution agreement with Alliance Healthcare. As we continue to develop our marketing strategy, expand our team of sales representatives and increase the line of products offered to the CCG’s, we expect to capitalize on our distribution agreement with Alliance Healthcare.

Needle Destruction. On December 31, 2015, the Company completed the acquisition of certain high-quality medical products technology, including the tangible and intangible assets, for the Disintegrator Insulin Needle Destruction Unit (which we refer to as “Disintegrator”) and the Carotid Artery Non-Contact Thermometer. The Disintegrator is the only needle destruction device which has been approved by the United States Food and Drug Administration.

The proper management of medical waste, also referred to as biohazardous waste, biomedical waste or infectious waste, which is generated in healthcare facilities, commercial businesses and private home healthcare is extremely important to avoid regulatory issues and more importantly to prevent the spread of infectious diseases. Needles and soft wastes, those saturated with blood or certain other bodily fluids, must be properly handled, contained, stored, shipped and treated in accordance with all governmental regulations. To date, the most common system used to dispose of used needles has been sharp container boxes. Generally, this type of device is compatible for use in healthcare facilities, commercial businesses and private homes. It is a portable device used to destroy needles and lancets utilizing an electrical current which incinerates the lancet or syringes. It uses a rechargeable battery which delivers an electrical current to produce an arc of electricity directed at the tip of the syringe. This electrical arc disintegrates the needle and any residue is collected in a self-contained chamber in the device. The Company’s initial needle destruction device is referred to as the Sharps and Needle Destruction Device, the SANDD mini. This device aims to change both the way patients and physicians dispose of their needles and to eliminate the risk of needle stick injuries in the future. Utilizing a plasma arc the SANDD mini heats the needle to over 2500 degrees Celsius in less than three seconds, eliminating both the needle and all known pathogens in the process. The device uses a rechargeable battery to deliver the plasma arc to the needle. A fully charged battery will disintegrate greater than 100 needles before needing to be recharged. The SANDD mini is designed to be used with hypodermic needles attached to prefilled syringes or diabetic pen injection devices that measure less than 1 inch in length and between 27-32 gauges in diameter. The device produces little to no waste leaving the syringe to be disposed of in general waste as opposed to the need for the use of a sharps box. The change in this route of waste disposal is projected to offer healthcare providers significant budgetary savings and ease of disposal in home healthcare settings. The SANDD mini has completed its field evaluation and is now available for sale.

Subsequent to June 30, 2018, RedHawk Medical Products, LLC, a wholly-owned subsidiary of the Company, acquired the world-wide exclusive manufacturing and distribution rights to certain intellectual properties which the Company believes will significantly expand the current market capabilities of its SANDD mini needle destruction unit. This new needle incineration technology (the “SANDD Pro”) increases the Company’s needle incineration capabilities to include 14 gauge hypodermic needles and higher, up to 8” in length. Additionally, the acquired SANDD Pro technology features a portable, rechargeable, battery operated unit. This portable unit (the “SANDD Pro Portable”) will incinerate as many as 300 needles, ranging in gauges as think as 21 gauge and lengths up to 8” on a single charge. The SANDD Pro Portable is ideal for field use by first responders, home health care nurses and veterinarians.

The newly acquired SANDD Pro technology includes, but is not limited to, technical designs, drawings, trademarks, tradenames, clinical test data, and all manufacturing tooling and fixtures.

The complete line of SANDD needle incineration units can be used in virtually all home and commercial applications including hospitals, first responders, a full range of clinics and primary care physicians, dentists, veterinarians, retirement and non-acute healthcare facilities. The Company believes the SANDD Pro and the SANDD Pro Portable will be available for sale by the end of the 2018 calendar year.

Third Party Medical Device Distribution

In the future, we will only market products we own and manufacture. Until we adequately develop our product base, we will continue to offer for sale, certain medical devices owned by third parties. We will, however, periodically review the market acceptance of each third-party product being marketed by us and examine the profitability of each third-party marketing effort in comparison to the cost incurred in order to market that product. In the future, we may decide the market acceptance of a particular product is not adequate or profitability of marketing such product is unacceptable. As such, we may periodically add, revise, amend or discontinue various third-party distribution agreements.

Woundclot. On February 2, 2016, the Company announced that RedHawk Medical Products UK Ltd, a wholly owned subsidiary of the Company, had entered into a contract with Core Scientific Creations Ltd. for the distribution of WoundClot Surgical – Advanced Bleeding Control (which we refer to as “WoundClot”) in the United Kingdom. WoundClot, developed and manufactured in Israel by Core Scientific Creations Ltd, is the first UK Class III medical device, fully implantable surgical hemostat designed to stop moderate to severe arterial and venous hemorrhage without the need to compress directly onto the wound.

Hemostatic refers to a procedure, device or substance that arrests the flow of blood. Direct pressure, tourniquets and surgical clamps are mechanical hemostatic measures. Gelatin sponges, solutions of thrombin and microfibrillar collagen, which cause the aggregation of platelets and formation of clots, are used to arrest bleeding in surgical procedures. WoundClot is a single use sterile bio-absorb Hemostatic product made of non-oxidized cellulose, which can be fabricated into a variety of forms suitable in controlling bleeding from various kinds of wounds. WoundClot has been uniquely engineered and manufactured with a patented molecular structure, designed to entrap platelets and coagulants in a modified physical molecular matrix. WoundClot is the first cellulose-based product to be manufactured using a non-oxidative process. This change in the manufacturing process of WoundClot results in major clinical advantages. The first of these advantages is a significantly increased absorptive capability, enabling WoundClot to arrest and control even severe arterial bleeding. Once bleeding has been stopped and coagulation has formed, WoundClot can be easily removed without disrupting the already formed clot. Additionally, it opens up a much wider range of indications than traditional oxidized cellulose based competitive products, has a truly non-compression application and is fully biodegradable within seven days, meaning it can be implanted within the body, further minimizing the risk of secondary post-surgical bleeding.

During 2016, the Company, in conjunction with EcoGen Europe Ltd (which we refer to as “EcoGen”), our European branded generic pharmaceutical subsidiary, has begun marketing the product to large teaching hospitals in the United Kingdom. While the product has been successfully trialed in various surgery disciplines including cardiothoracic, hepatobiliary, pediatric neurosurgery, vascular and trauma surgery and has been shown to outperform currently established products, market acceptance has been limited. We are also considering the introduction of WoundClot into other markets including the United States.

Non-Contact Thermometers. On March 31, 2014, we entered into and closed an asset purchase agreement with American Medical Distributors, LLC (which we refer to as “AMD”), pursuant to which we have acquired from AMD all right, title and interest of AMD in and to a certain distribution contract (which we refer to as the “HuBDIC Agreement”) dated November 27, 2013 with HuBDIC Co. Ltd., a Korean corporation (which we refer to as “HuBDIC”), pursuant to which AMD had been granted the exclusive right to distribute in the Americas certain professional and consumer grade non-contact thermometers known as the Thermofinder FS-700 Pro (professional model) and FS-700 (retail model), and any future versions (which we refer to as collectively, the “Thermofinder”). In connection with the acquisition, we also received $60,000 and any assets of AMD related to its distribution business, including all sales leads and related materials (which we refer to as collectively, including the HuBDIC Agreement, the “AMD Assets”), and in consideration of the AMD Assets, we issued to four designees of AMD an aggregate of 152,172,287 shares of our common stock.

The material terms of the HuBDIC Agreement are as follows: (a) term of five years from November 7, 2013; (b) upon receiving U.S. Food and Drug Administration (which we refer to as “FDA”) marketing clearance of the HuBDIC products, we are required to purchase a minimum of 3,000 product units for re-sale during year one of the distribution period, 8,000 during year two, and 15,000 during each subsequent year; (c) a $10,000 distribution fee previously paid to HuBDIC by AMD was credited toward our first product order; and (d) the distribution fee is refundable to us at our election. On or about July 2, 2014, HuBDIC received marketing clearance from the FDA for the sale and distribution of the Thermofinder. In November 2014, we paid for and took delivery of 500 units of the Thermofinder FS-700 Pro. We have agreed with HuBDIC to defer payment for and delivery of the balance of 2,500 units until a later date. The Company is actively soliciting orders for and has sold some of the first 500 units. The Company’s board of directors is currently evaluating future marketing strategies for the sales and distribution of additional units.

The Thermofinder is medical grade non-contact thermometer that is currently approved and distributed in Asia and Europe, and its features include the following:

Zonis. Through independent sales representatives, EcoGen sells Zonis into a number of European countries, Australia and New Zealand. Zonis is a patented antimicrobial ionic silver calcium catheter dressing with both wound healing and hemostatic properties. It is designed to be placed directly over the exit site of all vascular and non-vascular percutaneous medical devices. Zonis reduces bacteria colonization and related bloodstream infections by delivering ionic silver directly to the site.

Real Estate

During fiscal 2017, we announced the planned sale of certain real estate investments. The Company believes these properties have maximized their return and the sale proceeds resulting therefrom will be better utilized in our branded generic pharmaceutical and medical device business units.

Tower Hotel Fund 2013, LLC. On December 31, 2015, RedHawk Land & Hospitality, LLC, a wholly owned subsidiary of the Company, acquired from Beechwood 280,000 Class A Units (approximately a 2.0% membership interest) of fully paid, non-assessable units of limited liability company interest in Tower Hotel Fund 2013, LLC, a real estate development limited liability company formed in the state of Hawaii for acquisition, restoration and development of the Naniloa Hilo Resort in Hilo, Hawaii. The $625,000 purchase price was paid by the issuance of 625 shares of the Company’s Series A Preferred Stock. The purchase price was determined by an independent third-party valuation. Beechwood is a real estate limited liability company owned and controlled by G. Darcy Klug, a stockholder and Chief Financial Officer of the Company.

Subsequent to June 30, 2018, the Company received a cash payment of approximately $370,000 as a partial return on our investment. Pursuant to the terms of the limited liability operating agreement, the Company has offered to sell its membership interest in the Tower Hotel Fund 2013 to the remaining members in the Tower Hotel Fund 2013. The Company expects to complete the sale prior to June 30, 2019.

Other Real Estate. During the year ended June 30, 2017, we decided to sell our Louisiana real estate holdings, which includes our former corporate headquarters on Chemin Metairie Road in Youngsville, Louisiana and a property on Jefferson Street in Lafayette. As a result of that decision, the net book value of those properties along with related mortgage notes were reflected as assets and liabilities held for sale in the balance sheets. A sale of these properties did not occur in the fiscal year ended June 30, 2018 and, as such, the Company has returned these properties to assets held for use. We will continue to list these properties for sale, but it is uncertain if the sales will occur during the next twelve months. As such, these real estate assets, and related liabilities, have been reclassified in the 2018 and 2017 balance sheets. Based on the present real estate market and discussions with brokers, no impairment of the recorded amounts has occurred as of June 30, 2018.

Jefferson Street Property. On November 13, 2015, we acquired certain commercial rental property, consisting of $75,000 of land and $405,000 of buildings and improvements, from Beechwood for $480,000. The purchase price was paid by the Company through the assumption of $265,000 of long-term bank indebtedness (see Note 6) plus the issuance of 215 shares of the Company’s Series A Preferred Stock (see Note 8). 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, which included the cost of specific security improvements requested by the lessee.

In August 2017, we entered into a new triple-net lease agreement with the Louisiana 3^rd Circuit Court of Appeals to renew and extend the current lease term to December 31, 2022.

Youngsville Property. On December 31, 2015, we acquired certain commercial real estate from Beechwood to be used as our corporate office for $300,000, consisting of $35,000 of land and $265,000 of buildings and improvements. The purchase price was paid by the Company with the issuance of 300 shares of the Company’s Series A Preferred Stock. The purchase price of the property was determined by independent third-party appraisal.

On July 1, 2017, we entered into an agreement for the lease, with an option to purchase, these former offices. Under the terms of the agreement, the tenant leased the property through June 30, 2018 and, at the end of the lease term, the tenant had the option to purchase the property for $300,000. On June 30, 2018, the tenant did not exercise his option to purchase the property. The Company has returned the property to service and currently uses this property as offices for our medical products unit.

Specialized Security System Manufacturing and Distribution

Centri Controlled Entry System. On April 11, 2016, the Company acquired the exclusive United States manufacturing and distribution rights for the Centri Controlled Entry System (which we refer to as “Centri”), a unique, nominal dose transmission x-ray full body scanner capable of finding weapons, drugs and other metallic and non-metallic contraband concealed on and within the human body. The Company acquired these exclusive rights from Basic Technologies, Inc. who holds the exclusive worldwide license to manufacture and sell Centri. During the quarter ended June 30, 2016, the Company received approval from the FDA for the importation, assembly and demonstrations of Centri. Phase I radiation testing has been successfully completed. Approval for human testing and the sale of Centri units was received from the Louisiana Department of Environmental Quality during the quarter ending September 30, 2016.

The Company is continuing to successfully test the safe operation of Centri and is currently working with the Louisiana State University Innovation Park to develop our marketing strategy to offer Centri for sale and/or lease as an alternative security system in various commercial applications.

Customers, Marketing and Contracting

Our medical devices and branded generics are to be marketed to a broad base of users and are ideal for home and institutional use. The market for our devices and branded generics includes:

Safety and Quality Assurance

Our manufacturing operations require a wide variety of raw materials, including electronic and mechanical components, batteries, carry bags, and molded plastic components and other supplies. We rely on third-party manufacturers to supply several components of our medical devices. We typically enter into supply agreements for these components that specify quantity, quality requirements, and delivery terms, which, in certain cases, can be terminated by either party upon relatively short notice. For each medical device, we have elected to source certain key components from single sources of supply, including our batteries, molded plastic components. While alternative sources of supply are readily available for these components, we believe that maintaining a single source of supply allows us to control production costs and inventory levels, and to manage component quality. In order to mitigate against the risks related to a single source of supply, we qualify alternative suppliers and develop contingency plans for responding to disruptions. If any single-source supplier were no longer able to supply a component, we believe we would be able to promptly and cost-effectively switch to an alternative supplier without a significant disruption to our business and operations. We have adopted additional contingency plans to protect against an immediate disruption in supply of our battery components, and any potential delay that may result from a switch to a new supplier. These contingency plans include our own inventory management, along with a requirement that certain suppliers maintain specified quantities of inventory in multiple locations, as well as requiring certain manufacturers to maintain redundant manufacturing sites. We believe that these contingency plans would limit any disruption to our business in the event of an immediate termination of either our battery supply.

Governmental Regulations

Our medical devices and generic pharmaceuticals are subject to a wide variety of stringent federal, state and local laws and regulations. We believe we have acquired all of the necessary permits and licenses necessary to manufacture, sell and safely distribute our products.

Medical Devices. Government authorities in the United States, Canada, and other countries in the Americas regulate the research, development, testing, manufacturing, labeling, promotion, advertising, distribution, marketing and export and import of medical devices at the federal, state and local levels. The process of obtaining regulatory approvals and the subsequent substantial compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.

In the United States, thermometers for human clinical use are classified as medical devices and require (i) an establishment license and (ii) depending on the class of device sought to be marketed, pre-market approval (PMA) or the less rigorous pre-market clearance.

Establishment License. Owners or operators of places of business (also called establishments or facilities) that are involved in both the production and distribution of medical devices intended for use in the United States (U.S.) are required to register annually with the FDA. This process is known as establishment registration. Most establishments that are required to register with the FDA are also required to list the devices that are made there and the activities that are performed on those devices. As a domestic distributor of certain medical devices in the United States, we will not be required to obtain an establishment license for those products, although the owner/operator of the products we distribute will be so required. Certain countries do not require an establishment license. Our needle destruction unit has an establishment license registered with the FDA.

Depending on the class designation of the device sought to be marketed, the owner/operator of the product must also obtain pre-market approval (PMA) or pre-market notification clearance before marketing in the U.S.

U.S. Medical Device Class Designations. The FDA has established classifications for different generic types of devices and grouped them into medical specialties. Each of these devices is assigned to one of three regulatory classes based on the level of control the FDA deems necessary to assure the safety and effectiveness of the device.

Class I includes products of which several examples are already approved and marketed in Canada or the U.S. As long as the basic science remains the same, the application for approval of a new product is straightforward. Examples of products in this category include pregnancy tests or regular needles/syringes.

Class II products are those which are non-invasive, meaning they are not injected or inserted into the patient. Often these products are approved and sold throughout the world. The products which we are currently focusing on distributing all belong to Class II. In order to secure the necessary license for these products, we are required to submit all the documentation which led to the approval of the products in other countries. In our case, our products are already approved in Europe and Korea. We are required to submit to the FDA all the scientific data, results, approval process and certificates of good quality management, ISO 13485. Usually, products that have the ISO accreditation will satisfy FDA requirements.

Class III and IV include medical devices that use invasive techniques. If the medical device has been approved in another region, it is considered Class III. If it is new, it is considered Class IV. Invasive testing equipment such as colonoscopy, endoscopy, body lesion removal devices etc., are all considered Class III or IV. At this time, we do not manufacture or sell any Class III or Class IV medical devices.

Premarket Clearance. We focus our medical device distribution business on Class I and II medical devices. WoundClot and electronic clinical thermometers such as the Thermofinder are classified as Class II devices by the FDA are not subject to Premarket Approval (PMA). SANDD is currently classified as a Class II medical device.

Each person who wants to market in the U.S., a Class I or II device intended for human use, for which a Premarket Approval (PMA) is not required, must submit a 510(k) application to the FDA unless the device is exempt from the Section 510(k) requirements of the Federal Food, Drug, and Cosmetic Act (the Act).

A 510(k) application is a pre-market submission made to the FDA to demonstrate that the device to be marketed is at least as safe and effective, that is, substantially equivalent to a legally marketed device that is not subject to PMA. Submitters must compare their device to one or more similar legally marketed devices and make and support their substantial equivalency claims. A legally marketed device is a device that was legally marketed prior to May 28, 1976, for which a PMA is not required, or a device that has been reclassified from Class III to Class II or Class I, or a device which has been found substantially equivalent through the 510(k) process. The legally marketed device(s) to which equivalence is drawn is commonly known as the “predicate.” Although devices recently cleared under 510(k) are often selected as the predicate to which equivalence is claimed, any legally marketed device may be used as a predicate. Legally marketed also means that the predicate cannot be one that is in violation of the Act.

Before marketing a device, each submitter must receive an order, in the form of a letter, from the FDA which finds the device to be substantially equivalent and states that the device can be marketed in the U.S. This order “clears” the device for commercial distribution.

Until the submitter receives an order declaring a device substantially equivalent, the submitter may not proceed to market the device. Once the device is determined to be substantially equivalent, it can then be marketed in the U.S. The substantially equivalent determination is usually made within 90 days and is made based on the information submitted by the submitter.

Substantial Equivalence. A 510(k) clearance requires demonstration of substantial equivalence to another legally U.S. marketed device. Substantial equivalence means that the new device is at least as safe and effective as the predicate.

A device is substantially equivalent if, in comparison to a predicate it:

or

A claim of substantial equivalence does not mean the new and predicate devices must be identical. Substantial equivalence is established with respect to intended use, design, energy used or delivered, materials, chemical composition, manufacturing process, performance, safety, effectiveness, labeling, biocompatibility, standards, and other characteristics, as applicable.

A device may not be marketed in the U.S. until the submitter receives a letter declaring the device substantially equivalent. If the FDA determines that a device is not substantially equivalent, the applicant may:

Status of Medical Device Premarket Clearance. SANDD received its PMA in March 15, 2002. HuBDIC Co. Ltd. made a 510(k) submission to the FDA on January 29, 2014 and received pre-market clearance for the Thermofinder FS-700 and FS-700 Pro on or about July 2, 2014.

Future Business Opportunities. The Company’s board of directors is currently evaluating our future strategy for marketing all of our medical devices including SANDD mini, SANDD Pro, WoundClot and the Thermofinder FS-700 and FS-700 Pro non-contact thermometers. Under consideration is possibly contracting with third parties for the distribution of our medical devices to hospitals, doctors, schools, first responders, home health care providers, etc. The Company is considering engaging an independent marketing representative to offer its SANDD mini and the consumer version of the digital non-contact thermometer, Thermofinder FS-700, through retail chains. No decision has yet been made on the future marketing strategies.

Our board of directors is evaluating whether to seek opportunities related to the distribution of other medical devices besides WoundClot, Zonis and the Thermofinder.

The Company’s board of directors is also considering entry into other lines of business including, but not necessarily limited to, commercial and hospitality real estate, specialized financial services and equipment rental services. No decision has yet been made on entering these or other future lines of business.

Insurance

Branded Generic Pharmaceuticals and Medical Devices. Our operations and products are subject to inherent risks of personal safety and injury and, as such, we maintain insurance policies on the sale of our products to protect us in the event of a loss. Insurance coverage is provided for us by the owners of the products we distribute for third parties where we consider such coverage necessary.

We believe our insurance coverages for these risks are adequate. Historically, we have not experienced a loss in excess of our policy limits; however, there can be no assurance that we will be able to maintain adequate insurance at rates we consider to be commercially reasonable, nor can there be any assurance such coverage will be adequate to all of the claims that may arise.

Property and Casualty. We also maintain insurance against property damage, flood and other catastrophic events that may result in physical damage or destruction to our real estate. All policies are subject to deductibles and other coverage limitations. While we believe over coverage limits are adequate to protect against loss, there can be no assurance that we will be able to maintain adequate insurance at rates we consider to be commercially reasonable, nor can there be any assurance such coverage will be adequate to all of the claims that may arise.

Competition

The medical device and branded generic pharmaceutical distribution industries are highly competitive. We are a development stage company without established operations in our industry and have a weak competitive position. We aim to compete with junior and senior medical device and branded generic pharmaceutical manufacturers or distributors who are actively seeking to develop or acquire and sell devices competitive with our own. Competition for the medical device and branded generic pharmaceutical assets is intense and we may lack the technological information, human resources, infrastructure, expertise, and financial resources available to our competitors. Such competition could adversely impact our ability to attain the financing necessary for us to develop our current assets, generate revenues, or obtain and develop future assets.

Many of the companies with which we aim to compete for financing and for the acquisition of medical device and branded generic pharmaceutical assets have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on assets of merit or on developing and distributing their own technologies.

General competitive conditions may be substantially affected by various forms of regulation introduced from time to time by the governments of the United States and other countries, as well as factors beyond our control, including overall levels of supply and demand for the product types which we seek to distribute.

In the face of competition, we may not be successful in acquiring or successfully exploiting any distribution rights which we have acquired or may acquire in the future. Despite this, we hope to compete successfully in the medical device industry by:

Employees

Currently, we do not have any employees. Our officers are providing their services to us on an independent consultant basis, but, at this time, we have not entered into any consulting or employment agreements with them. Our directors, executive officers and certain contracted individuals play an important role in the running of the Company. We do not expect any material changes in the number of employees over the next 12-month period. We intend to engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our anticipated sales and marketing programs.

Available Information

We are required to file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K with the U.S. Securities and Exchange Commission (which we refer to as the “SEC”) and our filings are available to the public on our website at www.redhawkholdingscorp.com and at the SEC’s website at http://www.sec.gov.

ITEM 1A. RISK FACTORS

Our business routinely encounters and attempts to address risks, some of which will cause our future results to differ, sometimes materially, from those originally anticipated. Below, we have described our present view of the most significant risks facing the Company. The risk factors set forth below are not the only risks that we may face or that could adversely affect us. If any of the circumstances described in the risk factors discussed in this Form 10-K actually occur, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected. If this were to occur, the trading price of our securities could decline significantly, and stockholders may lose all or part of their investment.

The following discussion of risk factors contains “forward-looking statements,” which may be important to understanding any statement in this Form 10-K or in our other filings and public disclosures. In particular, the following information should be read in conjunction with the sections in this Form 10-K entitled, “Cautionary Note about Forward-Looking Statements,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 8. Financial Statements and Supplementary Data.”

Risks Related to Our Overall Business Operations

We have a limited operating history with significant losses and expect losses to continue for the foreseeable future.

We have a limited history of profitable operations – we incurred net losses of $910,052 and $407,681 for the fiscal years ended June 30, 2018 and 2017, respectively. As a result, at June 30, 2018, including preferred stock dividends, we had an accumulated deficit of $4,302,291. We have sustained significant costs in connection with the acquisition and development of certain technologies and businesses combined with significant legal fees incurred in connection with certain litigation matters. Prior to the fiscal year ending June 30, 2017, we did not generate any significant revenues. Our profitability will require successful commercialization of our medical device technology, branded pharmaceutical, security systems or future products for which we may acquire a distribution license and reduction of our operating costs. We may not, however, be able to successfully exploit any distribution rights which we currently have or acquire in the future and may never become profitable.

There is doubt about our ability to continue as a going concern due to recurring losses from operations, accumulated deficit and insufficient cash resources to meet our business objectives, all of which means that we may not be able to continue operations.

As discussed in Note 1 to our financial statements for the year ended June 30, 2018, with the exception of the three-month period ended March 31, 2017, we have generated operating losses since inception, and our cash resources are insufficient to meet our planned business objectives. We expect to continue to incur development costs and operating costs, losses and negative cash flows until our products gain market acceptance sufficient to generate a commercially viable and sustainable level of sales, and/or additional products are developed and commercially released, and sales of such products made so that we are operating in a profitable manner. The continuation of the Company as a going concern is still dependent upon the continued financial support from its stockholders, the ability to raise equity or debt financing, cash proceeds from the sale of assets and the attainment of profitable operations from the Company’s businesses in order to discharge its obligations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. Our independent auditors included an explanatory paragraph to their audit opinion issued in connection with our 2018 financial statements that states there is substantial doubt about our ability to continue as a going concern.

We have had negative cash flows from operations since inception. We will require significant additional financing, the availability of which cannot be assured, and if we are unable to obtain such financing, our business may fail.

To date, we have had negative cash flows from operations and have depended on sales of our equity securities, debt financing and stockholder loans to meet our cash requirements. We may continue to have negative cash flows. There is no assurance that actual cash requirements will not exceed our estimates. We may require additional funds to finance working capital and pay for operating expenses and capital requirements until we achieve a positive cash flow.

Our ability to market and sell our medical devices will be dependent upon our ability to raise significant additional financing. If we are unable to obtain such financing, we will not be able to fully develop our business. Specifically, we will need to raise additional funds to:

At June 30, 2018, we had a total of 1,000,000,000 authorized shares, of which 362,939,227 shares of our common stock were outstanding as of June 30, 2018. Subsequent to June 30, 2018, we increased our authorized shares to 2,000,000,000. In the future, we may not be able to obtain adequate additional equity or debt financing on acceptable terms as required. In order to raise adequate levels of capital necessary to meet the Company’s future needs, the board of directors may need to consider completing a reverse stock split, amending our articles of incorporation to increase the number of authorized shares or authorize the possible issuance of preferred stock. Certain of these considerations may require regulatory approval.

Even if financing is available, it may not be available on terms that are favorable to us or in sufficient amounts to satisfy our requirements. Any additional equity financing may involve substantial dilution to our then existing shareholders. If we require, but are unable to obtain, additional financing in the future, we may be unable to implement our business plan and our growth strategies, respond to changing business or economic conditions, withstand adverse operating results and compete effectively. More importantly, if we are unable to raise further financing when required, we may be forced to scale down our operations or sell significant assets, and our ability to generate revenues may be negatively affected.

If we fail to effectively manage the growth of the Company and the commercialization of our medical devices, our future business results could be harmed, and our managerial and operational resources may be strained.

As we proceed with the commercialization of our medical devices and the expansion of our marketing and commercialization efforts, we expect to experience significant growth in the scope and complexity of our business. We will need to add staff to market our services, manage operations, handle sales and marketing efforts and perform finance and accounting functions. We anticipate that we will be required to hire a broad range of personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance of all of the functions necessary to effectively service and manage our business, or the failure to manage growth effectively, could have a material adverse effect on our business and financial condition.

The effect of competition in our industry could adversely impact our ability to generate revenues.

The medical device distribution industry is highly competitive. We are a development stage company without established operations in our industry and have a weak competitive position. We aim to compete with junior and senior medical device manufacturers or distributors who are actively seeking to develop or acquire and sell devices competitive with our own. Competition for the medical device assets is intense and we may lack the technological information, human resources, infrastructure, expertise, and financial resources available to our competitors. Such competition could adversely impact our ability to attain the financing necessary for us to develop our current assets, generate revenues, or obtain and develop future assets.

Risks Related to the Market for Our Stock

The market price of our common stock can become volatile, leading to the possibility of its value being depressed at a time when you may want to sell your holdings.

Because our stock is thinly traded, the market price of our common stock can fluctuate significantly. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These factors include: our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors; changes in financial estimates by us or by any securities analysts who might cover our stock; speculation about our business in the press or the investment community; significant developments relating to our relationships with our customers or suppliers; stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry; customer demand for our products; changes in governmental regulation of the medical devices that we distribute; investor perceptions of our industry in general and the Company in particular; the operating and stock performance of comparable companies; general economic conditions and trends; announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures; changes in accounting standards, policies, guidance, interpretation or principles; loss of external funding sources; sales of our common stock, including sales by our directors, officers or significant stockholders; and additions or departures of key personnel. Securities class action litigation is often instituted against companies following periods of volatility in their stock price. Should this type of litigation be instituted against us, it could result in substantial costs to us and divert our management’s attention and resources.

Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in the Company at a time when you want to sell your interest in us.

We have never declared or paid any cash dividends on shares of our common stock and do not anticipate doing so.

We intend to retain any future earnings for use in the operation and expansion of our business. We do not expect to pay any cash dividends on our common stock in the foreseeable future but will review this policy as circumstances dictate. Should we decide in the future to do so, our ability to pay dividends and meet other obligations may depend upon the receipt of dividends or other payments from any operating subsidiaries we may have in the future.

We are subject to penny stock regulations and restrictions, therefore the market for our common stock is limited and you may have difficulty selling your shares.

The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is therefore subject to Rule 15g-9 under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”), or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 (excluding the value of their primary residence) or annual incomes exceeding $200,000 individually, or $300,000 together with their spouses). For transactions covered by the Penny Stock Rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

A large number of shares may be eligible for future sale and may depress our stock price.

We may be required, under terms of current and future financing arrangements, to offer a large number of common shares to the public, or to register for sale by future private investors a large number of shares sold in private sales to them.

Sales of substantial amounts of common stock, or a perception that such sales could occur, and the existence of options or warrants to purchase shares of common stock at prices that may be below the then-current market price of our common stock, could adversely affect the market price of our common stock and could impair our ability to raise capital through the sale of our equity securities, either of which would decrease the value of any earlier investment in our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 2. PROPERTIES

Our corporate headquarters is located at 120 Rue Beauregard, Suite 206, Lafayette, Louisiana 70508. We lease approximate 1,250 square feet of office space. The offices are under lease through April 30, 2019 at a rate of $1,525 per month with the option to extend the lease for two, one-year periods. As of the date of this filing, we have not sought to move or change our office site as our space is adequate to meet our needs.

Our primary U.S operations facilities for testing our security system and maintaining our medical device inventory are located in leased facilities in at the Louisiana Business & Technology Center in Baton Rouge, Louisiana (“LSU Innovation Center”). This facility is located on the South Campus of Louisiana State University. At the LSU Innovation Center, we lease two (2) offices and warehouse facilities totaling approximately 1,800 square feet for $1,100 per month. The lease expires on December 31, 2018 and is subject to an annual renewal.

Our medical products unit operates from our previous corporate office. This property has about 3,000 square feet of office and storage capabilities and is owned by the Company.

In the United Kingdom, we lease approximately 650 square feet of administrative offices. Our inventory of generic pharmaceuticals is maintained in a bonded, pharmaceutical approved, third party warehouse and distribution facility near London, United Kingdom.

ITEM 3. LEGAL PROCEEDINGS

On January 31, 2017, the Company and a stockholder filed a complaint (the “Complaint”) in the United States District Court for the Eastern District of Louisiana (RedHawk Holdings Corp. and Beechwood Properties, LLC Case No. 2:17-cv-819). The Complaint names Daniel J. Schreiber (“Schreiber”) and the Schreiber Living Trust – DTD 2/08/96 (the “Schreiber Trust”) as defendants. Schreiber is the former Chief Executive Officer and director of RedHawk. The Schreiber Trust, of which Schreiber is the Trustee, is a shareholder of the Company. The Complaint lodged claims on behalf of RedHawk for securities fraud, fraud, and Schreiber’s breach of fiduciary duties.

On April 24, 2017, RedHawk and its shareholder filed an amended complaint (“Amended Complaint”) naming Schreiber as the only proper defendant in the suit, individually and as Trustee of the Schreiber Trust.

On May 22, 2017, Schreiber filed a motion to dismiss, or in the alternative to transfer, the suit on the grounds of lack of personal jurisdiction and improper venue. After the parties filed an opposition and reply, on August 16, 2017 the court denied the motion.

On September 13, 2017, Schreiber filed an answer to the Amended Complaint, as well as counterclaims against RedHawk, Beechwood, and a director of RedHawk for actions allegedly taken in the course of his duty as a director. The counterclaims against RedHawk and its director are for alleged violation of UCC § 8-401, breach of fiduciary duty, negligence, and unfair trade practices.

The legal remedies sought in these counterclaims were the subject of a lawsuit filed previously by Schreiber in the United States District Court for the Sothern District of California on April 24, 2017 (Case No. 3:17-cv-8824). At the time of the answer of the Louisiana lawsuit, the California action was still pending, and the answer asked that the counterclaim filed in Louisiana be stayed until the California case was adjudicated. On September 26, 2017, the court in the California action granted RedHawk’s motion to dismiss that suit.

On October 24, 2017, a scheduling conference was held. The parties agreed to, among other matters, to exchange documents and conduct other discovery, and, at this time, to schedule a bench trial starting November 5, 2018.

RedHawk plans to vigorously contest the claims against it in this matter and to pursue the claims against Schreiber, individually and as Trustee of the Schreiber Trust.

While we are insured for our legal defense costs in this matter, we have a $250,000 self-insured retention. During the year ended June 30, 2018, we recorded a charge of $250,000 for uninsured costs incurred in connection with this matter. We believe the ultimate resolution of this matter will not significantly adversely affect our financial position, operations or cash flows, other than the uninsured costs referred to above.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded on the Over-the-Counter® Venture Market under the symbol “IDNG.” The below table sets forth the range of high and low bid information for our common stock as reported by the Over-the-Counter Official Market site for the periods indicated, and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.

OTC Bulletin Board

Holders

As of September 15, 2018, an aggregate of 362,939,227 shares of our common stock were outstanding plus an additional 35,471,535 shares were held in treasury stock. There were 23 shareholders of record of our common stock plus approximately 3,000 shareholders of shares held in street name. On September 18, 2018, the last reported sale of our common stock as reported by the Over-the-Counter Official Market site was $0.0013 per share.

Our common shares are issued in registered form. ClearTrust, LLC (telephone number 813-235-4490) is the registrar and transfer agent for our common shares.

Dividends

We have never paid a cash dividend on our common stock. We intend to retain our future earnings, if any, to meet our and to finance the future operations of our business. Therefore, we do not plan to declare or pay any dividends to holders of our common stock in the foreseeable future. Our future dividend policy will be determined from time to time by our board of directors.

Recent Sales of Unregistered Securities

During the fiscal years ended June 30, 2018 and June 30, 2017, we sold the following securities in transactions that were not registered under the Securities Act of 1933, as amended (which we refer to as the “Securities Act”).

ITEM 6. SELECTED FINANCIAL DATA

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

RedHawk Holdings Corp. was incorporated in the State of Nevada on November 30, 2005 under the name “Oliver Creek Resources, Inc”. At its inception, we were an exploration stage company engaged in the acquisition, exploration and development of natural resources. We discontinued our oil and gas operations in 2014 and changed our business focus. Currently, we are a diversified holding company which, through our subsidiaries, is engaged in sales and distribution of medical devices, sales of branded generic pharmaceutical drugs, commercial real estate investment and leasing, sales of point of entry full-body security systems, and specialized financial services. Through its medical products business unit, the Company sells WoundClot Surgical - Advanced Bleeding Control, the SANDD™ Insulin Needle Destruction Unit (formerly known as the Disintegrator™), the Carotid Artery Digital Non-Contact Thermometer and Zonis®. Through our United Kingdom based subsidiary, we manufacture, and market branded generic pharmaceuticals, certain other generic pharmaceuticals known as “specials” and certain pharmaceuticals outside of the United Kingdom’s National Health Service drug tariff referred to as NP8’s. Our real estate leasing revenues are generated from a commercial property under a long-term lease. Additionally, the Company’s real estate investment unit holds limited liability company interest in a commercial restoration project in Hawaii. The Company’s financial service revenue is from brokerage services earned in connection with debt placement services. RedHawk Energy holds the exclusive U.S. manufacturing and distribution rights for the Centri Controlled Entry System, a unique, closed cabinet, nominal dose transmission full body x-ray scanner.

Certain Transactions

On November 12, 2015, we acquired certain commercial rental property, consisting of $75,000 of land and $405,000 of buildings and improvements, from a related party that is an entity controlled by a stockholder and officer of the Company, for $480,000. The purchase price was paid by the Company through the assumption of $265,000 of long-term bank indebtedness (see Note 7) plus the issuance of 215 shares of the Company’s newly designated Series A Preferred Stock (see Note 8). 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, which included the cost of specific security improvements requested by the lessee.

On December 30, 2015, we received, from a stockholder and officer of the Company, $1,862,458 of cash and marketable securities, net of a $980,000 line of credit balance, in exchange for 1,000 shares of our Series B Preferred Stock.

At December 31, 2015, the principal balance plus accrued interest totaled $100,000. At that date, the stockholder elected to convert the outstanding principal and interest balance into 100 shares of our Series A Preferred Stock. At June 30, 2016, there is no outstanding balance on the Line of Credit.

On December 31, 2015, we acquired certain commercial real estate from a related party that is an entity controlled by a shareholder and officer of the Company, to be used as our corporate office, for $300,000 consisting of $35,000 of land and $265,000 of buildings and improvements. The purchase price was paid by the Company with the issuance of 300 shares of the Company’s Series A Preferred Stock. The purchase price of the property was determined by independent third-party appraisal.

On December 31, 2015, RedHawk Land & Hospitality, LLC acquired from Beechwood Properties, LLC 280,000 Class A Units (approximately a 2.0% membership interest) of fully paid, non-assessable units of limited liability company interest in Tower Hotel Fund 2013, LLC, a real estate development limited liability company formed in the state of Hawaii for acquisition, restoration and development of the Naniloa Hilo Resort in Hilo, Hawaii. The $625,000 purchase price was paid by the issuance of 625 shares of the Company’s Series A Preferred Stock. The purchase price was determined by an independent third-party valuation. Beechwood Properties, LLC is a real estate limited liability company owned and controlled by G. Darcy Klug, a stockholder and Chief Financial Officer and Chairman of the board of directors of the Company.

On December 31, 2015, the Company completed the acquisition of certain high-quality medical products technology, including the tangible and intangible assets, for the Disintegrator and the Carotid Artery Non-Contact Thermometer. The Disintegrator is the only needle destruction device which has been approved by the United States Food and Drug Administration.

On March 24, 2016, the Company announced that its wholly owned subsidiary, RedHawk Pharma UK Ltd, has signed a definitive agreement with Scarlett to complete the acquisition of a 25% ownership investment in EcoGen, a United Kingdom based company specializing in the manufacturing and marketing of certain branded generic pharmaceuticals and medical devices. Subsequent to June 30, 2017, we have agreed to increase our ownership position in EcoGen to 75%.

We have authorized the issuance of up to $1 million in principal amount of convertible promissory notes (which we refer to as the “Convertible Notes”). The Convertible Notes are secured by certain Company real estate holdings and real estate holdings of a stockholder. The Convertible Notes mature on the fifth anniversary of the date of issuance and are convertible into shares of our common stock at a price of $0.015 per share. Interest accrues at a rate of 5% per annum and is payable semi-annually. Beginning 180 days after issuance of the Convertible Notes, the Company has the option to issue a notice of its intent to redeem, for cash, an amount equal to the sum of (a) 120% of the then outstanding principal balance, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Convertible Notes. The Company may only issue the notice of its intent to redeem the Convertible Notes if the trading average of the Company’s common stock equals or exceeds 300% of the conversion price during each of the five business days immediately preceding the date of the notice of intent to redeem. The holder of the Convertible Notes has the right to convert all or any portion of the Convertible Notes at the conversion price at any time prior to redemption. At June 30, 2017, there were approximately $586,000 of Convertible Notes outstanding which are convertible into our common stock at a conversion rate of $0.015 per share or 39,075,990 shares

On February 1, 2016, we received from an officer of the Company, $250,000 of cash in exchange for 250 shares of our Series B Preferred Stock.

At June 30, 2017, a stockholder and officer of the Company elected to convert $250,000 of the outstanding principal and interest balance owed to him into 233 shares of our Series A Preferred Stock.

In March 2018, certain stockholders of the Company made $67,000 in interest free advances to the Company a group of stockholders and invest.

Working Capital

RESULTS OF OPERATIONS

Operating Revenues

During the quarter ended December 31, 2015, we commenced operations in our financial services and commercial real estate leasing business units. On December 31, 2015, our medical device business unit completed the acquisition of certain specialized tangible and intangible medical devices. On March 23, 2016, RedHawk Pharma UK Ltd acquired a 25% equity interest in EcoGen Europe Ltd, a United Kingdom based distributor of branded generic pharmaceuticals. Sales of our medical devices and branded generic pharmaceuticals commenced during the quarter ending September 30, 2016. Prior to the quarter ended September 30, 2016, we had earned minimal revenue.

For the twelve-month period ended June 30, 2018, gross and net revenues from our pharmaceutical products, medical devices and commercial rentals totaled $384,279 and $275,845, respectively. Revenues in the pharmaceutical and medical device business unit are expected to continue to improve as market acceptance of our products increases. We are restructuring the sales of our pharmaceuticals to focus more on our branded generics and less on the more competitive drug market for “specials” and NP8’s. While we initially experienced a decline in our revenues, we expect net sales are expected to eventually improve as the Company’s pharmaceutical sales become more weighted to its branded generics which offer lower discounts than the discounts offered for Company’s “special” pharmaceuticals.

Operating Expenses and Consolidated Net Loss

For the year ended June 30, 2018, we reported consolidated net loss of $910,062 on net revenues of $275,845 as compared to a net loss of $407,681 on net revenues of $929,859 for the comparable twelve-month period ended June 30, 2017. The increase in our net loss resulted primarily from lower revenue, a $250,000 charge for non-operating litigation expense, and a $62,500 charge resulting from a settlement in connection with the increase of our ownership in EcoGen to 100%.

Operating expenses for the year ended June 30, 2018 totaled $713,509, a $544,265 reduction from the $1,257,774 of operating expenses for the comparable twelve-month period ended June 30, 2017. The reduction in operating expenses was primarily attributable to lower professional fees of $343,846, lower management fees of $60,000, lower operating expenses of $99,937, lower general and administrative expenses of $85,784, which were partially offset by an increase in sales and marketing expenses and higher depreciation and amortization.

For the twelve-month period ended June 30, 2018, we incurred a consolidated net loss of $910,062 or $nil per share compared with a consolidated net loss of $407,681 or $nil per share for the comparable year ended June 30, 2017. The increase in the loss was primarily attributable to the factors discussed above.

Liquidity and Capital Resources

As of June 30, 2018, we had cash of $19,034 compared with $53,939 of cash as of June 30, 2017. During the twelve-month period ended June 30, 2018, we completed the funding of $501,000 of new convertible notes. With the available proceeds from the notes, we reduced our trade payables.

During the year ended June 30, 2018, we commenced sales of our pharmaceutical products and medical devices. We also continued to focus on recapitalizing our balance sheet and reducing cash outlays for recurring operating costs. Because of our short operating history, obtaining traditional bank financing is difficult. As such, we use available cash to acquire pharmaceutical and medical device inventories and internally finance new accounts receivable resulting from increased business activity.

At June 30, 2018, we had total assets of $2,215,317 as compared with of $2,911,325 June 30, 2017. We had total liabilities of $2,106,242 at June 30, 2018 as compared with liabilities of $1,615,965 at June 30, 2017. The decrease in total assets was principally due to a reduction in receivables and inventory, along with annual depreciation and amortization charges against other assets. At June 30, 2018, we had working capital of $208,943 as compared to a working capital of $135,596 as of June 30, 2017.

To provide liquidity to meet current obligations and finance our internal growth, we have entered into a $250,000 line of credit with a stockholder and officer of the Company. As of June 30, 2017, the stockholder converted into Series A Preferred Stock, $250,000 loan to the Company under this line of credit. At June 30, 2018, the outstanding amount under this line of credit is approximately $23,000, leaving approximately $227,000 currently available to us under the line of credit at June 30, 2018. Additionally, certain of our real estate assets have matured in our portfolio and as such, we are pursuing the sale of its real estate holdings. When completed, we will use sale proceeds to retire debt and for working capital to continue to expand our other, more profitable, business activities. Also refer to the Going Concern section of Note 1 to our audited consolidated financial statements.

Cash Flows

Cash Flow from Operating Activities

During the twelve month period ended June 30, 2018, $411,268 of cash was used in our operating activities as compared to $154,640 in the comparable year ended June 30, 2017. Changes to our operating activities are sporadic and result from the early stage of implementation of our business strategies that are supported by capital raising activities.

For the year ended June 30, 2018, we incurred a net loss of $910,062 compared to a net loss of $407,681 in 2017, or a $502,000 increase in our net loss. This is the primary reason for the increase in our cash used in operating activities of approximately $260,000.

Cash Flow from Investing Activities

We purchased a certificate of deposit in the year ended June 30, 2018 for approximately $100,000, which is used as collateral for a bank line of credit.

Cash Flows from Financing Activities

During the twelve month period ended June 30, 2018, we had $484,613 of cash provided from financing activities, primarily from the issuance of convertible notes and proceeds from a bank line of credit. During the year ended June 30, 2017, we used $516,224 in our financing activities as we used available cash and proceeds of $210,000 from the issuance and sale of our convertible debentures and approximately $285,000 from advances from a related party under a line of credit agreement to pay in full the outstanding principal balance on our line of credit of approximately $1,000,000.

Going Concern

We continue to incur operating losses and use cash in our operating activities and are dependent upon asset sales, obtaining third party financing or shareholder loans to pursue any acquisitions and continue our operating activities. For these reasons, there is 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 our 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, our management’s estimates are based on historical experience, information from third party professionals, and 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. There are also new accounting pronouncements that have been issued that have not yet been adopted.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 supersedes prior revenue recognition guidance and provides a five step recognition framework that will require entities to recognize the amount of revenue to which it expects to be entitled for the transfer of goods and services. In July 2015, the FASB permitted early adoption and deferred the effective date of this guidance one year; therefore, it will be effective for the Company in the first quarter of fiscal 2019 and may be implemented retrospectively to all years presented or in the period of adoption through a cumulative adjustment. We do not believe that the adoption of this guidance will significantly affect our financial position, results of operations, cash flows and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases, which amended guidance for lease arrangements in order to increase transparency and comparability by providing additional information to users of financial statements regarding an entity’s leasing activities. The revised guidance requires reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements. The new guidance is effective for the Company in the first quarter of fiscal year 2020 and will be applied on a modified retrospective basis beginning with the earliest period presented. The Company is currently evaluating the impact of adopting this guidance on our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

RedHawk Holdings Corp.

June 30, 2018

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

of RedHawk Holdings Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of RedHawk Holdings Corp. (the Company) as of June 30, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s recurring losses from operations raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

REDHAWK HOLDINGS CORP.

Consolidated Balance Sheets

as of June 30,

The accompanying notes are an integral part of these financial statements

REDHAWK HOLDINGS CORP.

Consolidated Statements of Operations

For the Year Ended June 30,

The accompanying notes are an integral part of these financial statements

REDHAWK HOLDINGS CORP.

Consolidated Statements of Cash Flows

The accompanying notes are an integral part of these financial statements

REDHAWK HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY