UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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FORM 10-Q

(Mark One)

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended March 31, 2014

 

or

 

¨   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the transition period from ________   to ________

 

Commission file number: 0-22315

 

TUMBLEWEED HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Utah		34-1413104
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

 

720 Fifth Avenue 10th Floor, New York, New York                                            10019

(Address of principal executive offices)                                                            (Zip Code)

 

	(212) 247-0581
	(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)

 

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

 

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.

 

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company x

 

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

 

As of April 30, 2014, there were 127,170,667 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

 

  

TUMBLEWEED HOLDINGS, INC. AND SUBSIDIARY

FOR THE THREE MONTHS ENDED

MARCH 31, 2014

 

INDEX

 

Part I - FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Condensed Consolidated Balance Sheets as of March 31, 2014 (Unaudited) and June 30, 2013 (Audited)	3
	Condensed Consolidated  Statements of Operations for the three and nine months ended March 31, 2014 and 2013 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2014 and 2013 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements	6 - 7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	9
Item 4.	Controls and Procedures.	9
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings.	10
Item 1A.	Risk Factors.	10
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	10
Item 3.	Defaults Upon Senior Securities.	10
Item 4.	Mine Safety Disclosures.	10
Item 5.	Other Information.	11
Item 6.	Exhibits.	11
	Signatures	12
	Certifications— pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

 

 

2

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PART 1---FINANCIAL INFORMATION

 

Item 1.   Financial Statements.

 

TUMBLEWEED HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
		March 31, 2014				June 30, 2013
		(unaudited)				(audited)
		(in thousands, except per share data)
ASSETS
CURRENT ASSETS
TOTAL CURRENT ASSETS		$	—			$	—
TOTAL ASSETS		$	—			$	—
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accrued expenses and other current liabilities		$	109.9			$	82.9
Dividends payable			66.1				66.1
TOTAL CURRENT LIABILITIES			176.0				149.0
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred Stock, Par Value $.01; 15,000,000 Shares Authorized; 2,700 shares designated;			—				—
14,997,300 shares undesignated; no undesignated shares issued and outstanding
Series A Convertible Preferred Stock, Par Value $1 ; 2,200 Shares Authorized, Issued and
Outstanding; Liquidation Preference of $29.0			2.2				2.2
Series C Preferred Stock, Par Value $100 ; 500 Shares Authorized, Issued and Outstanding
Liquidation Preference of $129.6			50.0				50.0
Common Stock, Par Value $.01; Authorized 985,000,000 Shares; Issued and Outstanding
127,170,667 Shares			1,271.7				1,271.7
Additional paid in capital			41,296.6				41,296.6
Accumulated deficit			(42,796.5	)			(42,769.5	)
TOTAL STOCKHOLDERS' DEFICIT			(176.0	)			(149.0	)
TOTAL LIABILITIES AND  STOCKHOLDERS' DEFICIT		$	—			$	—
See accompanying notes to condensed consolidated financial statements.

 

 

3

 

TUMBLEWEED HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		For the Three Months Ended								For the Nine Months Ended
		March 31,								March 31,
		2014				2013				2014				2013
		(unaudited)								(unaudited)
		(in thousands, except per share data)								(in thousands, except per share data)
REVENUE		$	—			$	—			$	—			$	—
OPERATING EXPENSES
General and administrative expenses			(9.0	)			(25.0	)			(27.0	)			(75.0	)
LOSS FROM OPERATIONS			(9.0	)			(25.0	)			(27.0	)			(75.0	)
OTHER EXPENSE
Interest expense, net and other			—				(57.4	)			—				(172.5	)
TOTAL OTHER EXPENSE			—				(57.4	)			—				(172.5	)
NET LOSS		$	(9.0	)		$	(82.4	)		$	(27.0	)		$	(247.5	)
UNDECLARED PREFERRED STOCK DIVIDENDS			(1.3	)			(36.3	)			(3.9	)			(109.1	)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS		$	(10.3	)		$	(118.7	)		$	(30.9	)		$	(356.6	)
WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES
FOR BASIC AND DILUTED EARNINGS PER SHARE			127,170,667				53,864,165				127,170,667				53,864,165
BASIC AND DILUTED LOSS PER SHARE		$	0.00			$	0.00			$	0.00			$	0.00
See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

 

4

 

TUMBLEWEED HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		For the Nine Months Ended
		March 31,
		2014 (unaudited)				2013 (unaudited)
		(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(27.0	)		$	(247.5	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in assets and liabilities:
Accrued expenses and other current liabilities			27.0				247.5
NET CASH PROVIDED BY OPERATING ACTIVITIES			—				—
NET CASH PROVIDED BY INVESTING ACTIVITIES			—				—
NET CASH PROVIDED BY FINANCING ACTIVITIES			—				—
NET CHANGE IN CASH AND CASH EQUIVALENTS			—				—
CASH AND EQUIVALENTS, beginning of period			—				—
CASH AND EQUIVALENTS, end of period		$	—			$	—
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest expense		$	—			$	—
Income taxes		$	—			$	—
See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

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TUMBLEWEED HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(unaudited)

($’s in thousands)

 

NOTE 1- BASIS OF PRESENTATION

 

The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission relating to interim financial statements. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the Unites States of America (“U.S. GAAP”) for a complete set of consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the nine months ended March 31, 2014 are not necessarily indicative of the results to be expected for the full year.

 

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended June 30, 2013 which was filed with the Securities and Exchange Commission.

 

NOTE 2- LIQUIDITY AND FINANCIAL CONDITION

 

Our condensed consolidated unaudited financial statements were prepared on the assumption that we will continue as a going concern. We currently have a working capital and stockholders’ equity deficit of $176.0 and no cash on hand to satisfy our liabilities. Our ability to obtain resources sufficient to continue to meet our obligations as they come due is dependent on raising additional equity or by additional borrowings. Although we can provide no assurance that these additional funds will be available in the amounts or at the times we may require, management believes that it can obtain the additional funds necessary to continue its operations.

 

NOTE 3- PRINCIPLES OF CONSOLIDATION

 

The condensed consolidated financial statements include the accounts of Tumbleweed Holdings, Inc. (formerly Digital Creative Development Corporation) and its wholly owned subsidiary, (collectively the "Company"), Tumbleweed Holdings, Inc. (Utah). All significant inter-company accounts and transactions have been eliminated in consolidation.

 

 NOTE 4- ACCRUED EXPENSES AND OTHER LIABILITIES

 

Accrued expenses primarily consist of accrued legal and other professional fees and general administrative expenses of the Company. 

 

NOTE 5- COMMITMENTS AND CONTINGENCIES

 

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

 

 

 

6

 

 

TUMBLEWEED HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(unaudited)

($’s in thousands)

 

NOTE 6- INCOME (LOSS) PER SHARE

 

Basic income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding. Diluted income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares and potentially dilutive common share equivalents using the treasury stock method. Because the Company incurred a net loss in all periods presented, all potentially dilutive securities were excluded from the computation of income (loss) per share because the effect of including them is anti-dilutive.

 

The following table summarizes the number of common shares attributable to potentially dilutive securities outstanding for each of the periods presented which were excluded from the calculation of diluted income (loss) per share:

	Three Months Ended			Nine Months Ended
	March 31,			March 31,
	2014	2013		2014	2013
Stock options	1,250,000	1,250,000		1,250,000	1,250,000
Total	1,250,000	1,250,000		1,250,000	1,250,000

 

 

NOTE 7- SUBSEQUENT EVENTS

 

On March 20, 2014 the Company filed an Information Statement on Form 14C with the Securities & Exchange Commission.  The Company’s Board of Directors and shareholders with a majority of the Company’s voting power as of the close of business on March 1, 2014 (the “Record Date”) approved the following actions by written consent:

 

1.

An amendment to the Company’s Articles of Incorporation to increase the total number of authorized shares of the Company’s capital stock from (i) 615,000,000 shares, of which (A) 600,000,000 shares are designated as common stock; and (B) 15,000,000 shares are designated as preferred stock, par value $0.01 per share, to (ii) 1,000,000,000 shares, of which (A) 985,000,000 shares shall be designated as common stock; and (B) 15,000,000 shares shall remain designated as preferred stock.

2.

An amendment to the Company’s Articles of Incorporation to change the Corporation’s name to Tumbleweed Holdings, Inc., to reflect the new direction and/or business of the Company.

3.

Adoption of the Company’s 2014 Stock-Based Incentive Compensation Plan, which provides for the issuance of equity awards to the Company’s officers, directors, employees, and consultants.

 

These actions will not be effective until a date that is at least twenty days after the filing and mailing of the accompanying Information Statement. The accompanying Information Statement was mailed on or about April 2, 2014 to holders of record of Common Stock as of the close of business on the Record Date.

 

 

 

 

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

 

Statements contained in this Quarterly Report on Form 10-Q, other than the historical financial information, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements involve known and unknown risks, uncertainties or other factors which may cause actual results, performance or achievement of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward-looking statements. Factors that might cause such a difference include, but are not limited to, risks and uncertainties related to the substantial capital requirements, development of effective internal processes and systems, the ability to attract and retain high quality employees, changing overall economy and other risks described herein and in the Company's June 30, 2013 Annual Report on Form 10-K.

 

PLAN OF OPERATION

 

Tumbleweed Holdings, Inc. (formerly Digital Creative Development Corporation) (the “Company”) was principally involved in acquiring and investing in software and high technology companies, with a focus on acquiring controlling interests. At present, the Company does not have an operating business. The Company has since begun to search for candidates with which to enter into business combinations or strategic transactions.

 

The Company intends to locate and enter into a transaction with an existing, public or privately-held company (a "Target Business"). A transaction with a Target Business may be structured as a merger, consolidation, exchange of the Company's common stock for stock or assets of the Target Business or any other form, which will result in the combined enterprise remaining a publicly-held corporation.

 

Acquisitions or business combinations involve many risks, including:

 

·         Unforeseen obligations or liabilities;

·         Difficulty assimilating the acquired operations and personnel;

·         Risks of entering markets in which we have little or no direct prior experience;

·         Potential impairment of relationships with employees or customers as a result of changes in management;

·         Potential dilutive issuances of equity, large and immediate write-offs, the incurrence of debt, and amortization of goodwill or other intangible assets; and

·         Unforeseen obligations or liabilities.

 

We cannot make assurances that the Company will make any acquisitions or business combinations or that the Company will be able to obtain additional financing for such acquisitions or combinations, if necessary. If any acquisitions or combinations are made, we cannot make assurances that we will be able to successfully integrate the acquired or combined business into our operations or that the acquired or combined business will perform as expected. Furthermore, Federal and state tax laws and regulations have a significant impact upon the structuring of transactions. Management will evaluate the possible tax consequences of any prospective transaction and will endeavor to structure a transaction so as to achieve the most favorable tax treatment. There can be no assurance that the Internal Revenue Service or relevant state tax authorities will ultimately assent to our tax treatment of a particular consummated transaction. To the extent the Internal Revenue Service or any relevant state tax authorities ultimately prevail in recharacterizing the tax treatment of a transaction, there may be adverse tax consequences to us, the target business, and/or their respective stockholders. Tax considerations as well as other relevant factors will be evaluated in determining the precise structure of a particular transaction, which could be effected through various forms of a merger, consolidation or stock or asset acquisition.

 

Pending negotiation and consummation of a transaction, the Company anticipates that it will not have any business activities, aside from carrying on its search for a transaction partner. Should the Company incur any significant liabilities prior to a combination with a Target Business, it may not be able to satisfy, without additional financing, such liabilities as are incurred.

 

 

8

RESULTS OF OPERATIONS

 

Three Month Period Ended March 31, 2014 Compared To The Three Month Period Ended March 31, 2013.

 

The Company experienced a net loss of $9,000 in the three month period ended March 31, 2014 compared to a net loss of $82,400 in the comparable 2013 period. After settling its notes and other debts in April 2013, the Company did not incur interest charges during the three months ended March 31, 2014. The Company incurred approximately $57,400 of interest expense in the comparable 2013 period.

 

Nine Month Period Ended March 31, 2014 Compared To The Nine Month Period Ended March 31, 2013.

 

The Company experienced a net loss of $27,000 in the nine month period ended March 31, 2014 compared to a net loss of $247,500 in the comparable 2013 period. After settling its notes and other debts in April 2013, the Company did not incur interest charges during the nine months ended March 31, 2014. The Company incurred approximately $172,500 of interest expense in the comparable 2013 period.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company's current liabilities exceeded its current assets by approximately $176,000 at March 31, 2014, compared to current liabilities exceeding its current assets by $149,000 at June 30, 2013. The Company increased its operating obligations by $27,000 during the nine months ended March 31, 2014. These expenses were necessitated to meet filing requirements as a public reporting entity.

 

Since the Company is inactive, the Company can only depend on funding from third parties, of which there can be no assurance.

 

The proceeds of any such sales are anticipated to be principally used by the Company for general working capital purposes. The Company anticipates that its working capital needs will be financed by sales of additional equity or by additional borrowings until and unless the Company acquires a profitable operating business or makes other investments.

 

The condensed consolidated unaudited financial statements were prepared on the assumption that the Company will continue as a going concern. Considering the working capital and stockholders’ equity deficit of $176,000, the Company’s ability to obtain financial resources to meet its obligations depends on raising cash by issuing additional equity or by additional borrowings. However, the Company can provide no assurance that these additional funds will be available in the amounts or at the times required. Management currently believes that it can obtain the additional funds necessary to continue its operations.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

The Company's chief executive officer in conjunction with the chief financial officer, after evaluating the effectiveness of the Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report (the "Evaluation Date") has concluded that the Company's disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in the reports that it files with the Securities and Exchange Commission.

 

9

Changes in Internal Controls

 

During this fiscal quarter, there were no significant changes in the Company's internal controls over financial reporting or, to the knowledge of the management of the Company, in other factors that could significantly affect those controls subsequent to the Evaluation Date.

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

The Company is, from time to time, the subject of litigation, claims and assessments arising out of matters occurring during the normal operation of the Company's business. In the opinion of management, the liability, if any, under such current litigation, claims and assessments, that are material, have been properly accrued.

 

Item 1A. Risk Factors.

 

Not required for smaller reporting companies.

 

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

 

On March 28, 2014, the Company entered into Stock Purchase Agreement, (the “Purchase Agreement”), with an accredited investor, pursuant to which the Company agreed to issue an aggregate of 1,250,000 shares of its common stock for an aggregate purchase price of $25,000. The transaction closed on April 4, 2014. The securities were issued pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder, for transactions by an issuer not involving any public offering.

 

On April 1, 2014, the Company entered into Stock Purchase Agreement, (the “Purchase Agreement”), with an accredited investor, pursuant to which the Company agreed to issue an aggregate of 1,250,000 shares of its common stock for an aggregate purchase price of $25,000. The transaction has not yet closed. The securities will be issued pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder, for transactions by an issuer not involving any public offering.

 

On April 14, 2014, the Company entered into Stock Purchase Agreement, (the “Purchase Agreement”), with an accredited investor, pursuant to which the Company agreed to issue an aggregate of 15,000,000 shares of its common stock for an aggregate purchase price of $300,000. The transaction closed on April 18, 2014. The securities were issued pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder, for transactions by an issuer not involving any public offering.

 

Item 3. Defaults upon Senior Securities.

 

The holders of the Series A Preferred Stock are entitled to a cumulative dividend of $0.10 per share per annum. Such dividends accrue annually but are payable if and when the Company declares a dividend. The Company has never paid any dividends with respect to the Series A Preferred Stock. The 2,200 outstanding shares of Series A Preferred Stock are convertible into 3,300 shares of Common Stock for no additional consideration at the option of the holder of the stock. The Series A Preferred Stock is entitled to a liquidation preference of $1.00 per share, plus any accrued and unpaid dividends. The Series A Preferred Stock may be redeemed by the Company at a redemption price of $1.00 per share plus all accrued and unpaid dividends. The amount of accumulated and unpaid dividends was approximately $26,800 and $26,600 as of March 31, 2014 and June 30, 2013, respectively. 

 

 

 

10

The Series C Preferred stock is not convertible, but may be redeemed at the option of the Company at a redemption price of $100 per share plus accrued and unpaid dividends, at any time after October 31, 1999. The holders of the preferred stock are entitled to a cumulative dividend of 10% per annum, payable semiannually, if and when the board declares a dividend. As of March 31, 2014 and June 30, 2013, the Company had accumulated and unpaid dividends of approximately $13,400 and $9,700, respectively, on this series of preferred stock.

 

Item 4. Mine Safety Disclosures.

 

None.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

(a)	Exhibits:
31.1	Chief Executive Officer---Certification pursuant to Rule 13a-14 (a) of the Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Chief Financial Officer--- Certification pursuant to Rule 13a-14 (a) of the Exchange Act of  193,4 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Chief Executive Officer---Certification pursuant to Rule 13a-14(b) of the Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Chief Financial Officer-- Certification pursuant to Rule 13a-14(b) of the Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	TUMBLEWEED HOLDINGS, INC.
Dated:  May 15, 2014	By:	/s/ Gary Herman
		Name: Gary Herman
		Title: Chief Executive Officer
	By:	/s/ Skuli Thorvaldsson
		Name: Skuli Thorvaldsson
		Title: Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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