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Table of Contents


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark one)

 

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the fiscal year ended December 31, 2017

 

OR

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period              to             

 

Commission File Number: 333-198435

 

SOUTHEASTERN HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Colorado   46-3892319

(State or Other Jurisdiction

of Incorporation or Organization)

 

(IRS Employer

Identification Number)

 

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

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

  

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

 

Title of each class   Name of exchange on which registered
Common Stock, $0.0001 par value   None

 

Securities registered pursuant to Section 12(g) of the Act: All Common Stock $0.0001 par value

 

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

 

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 þ

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No þ

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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  II of this Form 10-K or any amendment to this Form 10-K. þ

 

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

 

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

 

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

 

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

 

The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant on December 31, 2017, the last business day of the registrant’s most recently completed fiscal quarter, determined by the lack of an active market for the Company’s common stock, was approximately $0. This computation assumes that all executive officers, directors and persons known to the registrant to be the beneficial owners of more than ten percent of the registrant’s common stock are affiliates of the registrant. Such assumption should not be deemed conclusive for any other purpose.

 

As of January 31, 2018, there were outstanding 40,000,000 shares of our common stock, par value $0.0001 per share, 10,000,000 shares of the Company’s Class A Super Voting preferred stock, par value $0.0001 per share, and 0 shares of the Company’s Class B Non-Voting preferred stock, par value $0.001 per share.

 

Documents incorporated by reference: None

 

 

 

   

 

 

 

TABLE OF CONTENTS

 

ITEM DESCRIPTION PAGE
     
Part I    
     
Item 1. Business 2
     
Item 1A. Risk Factors 5
     
Item 1B. Unresolved Staff Comments 14
     
Item 2. Description of Properties 14
     
Item 3. Legal Proceedings 14
     
Item 4. Mine Safety Disclosures 15
     
Part II    
     
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 15
     
Item 6. Selected Financial Data 15
     
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15
     
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 19
     
Item 8. Financial Statements and Supplementary Data 19
     
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 40
     
Item 9A. Controls and Procedures 40
     
Item 9B. Other Information 41
     
Part III    
     
Item 10. Directors, Executive Officers and Corporate Governance 42
     
Item 11. Executive Compensation 43
     
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 45
     
Item 13. Certain Relationships and Related Transactions and Director Independence 46
     
Item 14. Principal Accountant Fees and Services 46
     
Part IV    
     
Item 15. Exhibits and Financial Statement Schedules 47
     
  Signatures 48

 

 

 

 i 

 

 

FORWARD-LOOKING STATEMENTS

 

In addition to historical information, some of the information presented in this Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Although Southeastern Holdings, Inc. (“Southeastern” or the “Company”, which may also be referred to as “we”, “us” or “our”) believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations: there can be no assurance that actual results will not differ materially from our expectations. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Cautionary statements regarding the risks, uncertainties and other factors associated with these forward-looking statements are discussed under "Risk Factors" in this Form 10-K. You are urged to carefully consider these factors, as well as other information contained in this Form 10-K and in our other periodic reports and documents filed with the SEC.

 

PART I

 

ITEM 1. BUSINESS

 

Company History and Overview

 

History of Southeastern Holdings, Inc., a Delaware corporation

 

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

 

The Company redomiciled to become a Delaware Holding Corporation in September of 2016.

 

On September 22, 2016, the Company formed two wholly owned subsidiaries, SLS Industrial, Inc. and Southeastern Holdings, Inc. (both Delaware corporations).

 

On September 30, 2016, the Company merged with SLS Industrial, Inc., which became the surviving entity. SLS Industrial, Inc. and Southeastern Holdings, Inc. then restructured to a Delaware holdings structure, in which SLS Industrial, Inc., became a wholly owned subsidiary of Southeastern Holdings, Inc. The Companies restructured under a plan of merger and reorganization, in which the then-outstanding 25,118,273 shares of common stock, 10,000,000 shares of Class A Preferred Stock and 0 shares of Class B Preferred Stock would ultimately translate 1 for 1 to the same interests in Southeastern Holdings, Inc.

 

On December 1, 2016, the Company spun off its wholly owned subsidiary, SLS Industrial, Inc., leaving Southeastern Holdings as the only surviving entity. Immediately prior to the date of the spin-off, the subsidiary held fully impaired intellectual property and owed net liabilities of $527,270, comprised of $415,000 of convertible debt, $30,178 of accrued unpaid interest on that debt and $82,092 of accounts payable pertaining to professional fees. The Company effected the spinoff by transferring its entire equity interest in SLS Industrial, Inc. in exchange for assuming $40,000 of the outstanding accounts payable and issuing payment of $1,000 cash to the buyer. As a result, the Company recognized a debt extinguishment gain of $486,270 in 2016.

 

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

 

Our Auditors have issued a going concern opinion and the reasons noted for issuing the opinion are our lack of revenues, insignificant cash compared to current liabilities and a lack of available capital. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. However, the above conditions raise substantial doubt about the Company’s ability to do so. New business opportunities may never emerge, and we may not be able to sufficiently fund the pursuit of new business opportunities should they arise.

 

 

 

 2 

 

 

As of December 31, 2017, we had approximately $733 in cash on hand. Our current monthly cash burn rate is approximately $500, and it is expected that burn rate will continue until significant additional capital is raised and our marketing plan is executed. While there is currently very modest cash burn, our trade creditors may call debts at any time, and our cash reserves would not be sufficient to satisfy all balances. We are currently dependent on minimal expenses to be covered by a loan or other cash infusion from the company’s chairman of the board and CEO, Mr. Dickman. There is no guarantee that this cash infusion will continue to be made.

 

Implications of Being an Emerging Growth Company

 

We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

 

  A requirement to have only two years of audited financial statements and only two years of related MD&A;
  Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;
  Reduced disclosure about the emerging growth company’s executive compensation arrangements; and
  No non-binding advisory votes on executive compensation or golden parachute arrangements.

 

We have already taken advantage of these reduced reporting burdens in this prospectus, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)2(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. We have elected to use the extended transition period provided above and therefore our financial statements may not be comparable to companies that comply with public company effective dates.

 

We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

For more details regarding this exemption, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.”

 

COMPANY BUSINESS OVERVIEW

 

Our Company, originally Safe Lane Systems, Inc., was formed to develop the marketing and contract the manufacturing of certain products resulting from development of IP in design and manufacturing by Superior Traffic Controls, Inc. We licensed certain IP under a Master License and a Sub License to capitalize the marketing and contract manufacturing of certain products.

 

After spinning off the assets and liabilities of our traffic safety division in December 2016, we no longer possess the aforementioned intellectual property or rights thereto and are currently pursuing new business opportunities.

 

Our Proposed Products:

 

We are currently pursuing new product and business opportunities.

 

 

 

 3 

 

 

Sales and Marketing Plan

 

Once the company settles on a new business plan it will adopt an appropriate sales and marketing plan to support those efforts.

 

Milestones Reached To Date

 

In connection with our spinoff of primary operations, we are pursuing new business opportunities and will be developing milestones around those. Over the next year, we hope to find new business opportunities and generate additional capital to allow us to fund and develop new products and marketing.

 

As of December 31, 2017, the Company had a cash balance of $733. While, we currently have a $500 monthly cash burn rate, we do not have sufficient cash to pay vendor balances if called or to fund a new business plan. The current burn is being financed by advances from the companies Chairman of the board but there is no guarantee that these funds will be available in the future.

 

COMPETITION, MARKETS, AND REGULATION

 

Competition

 

With our current focus on pursuing new business opportunities, we are currently unable to concretely identify competition. However, we do expect fierce competition from established players and other up-and-coming players in our future industry.

 

Markets

 

None.

 

Title to Properties.

 

None.

 

Backlog of Orders.

 

We currently have no orders for sales at this time.

 

Government Contracts.

 

We have no government contracts.

 

Company Sponsored Research and Development.

 

We are not conducting any research, although our products and future products may be in development.

 

Number of Persons Employed.

 

As of January 31, 2018, we have no employees and 1 independent consultant. Our officers are spending part-time in this business – up to 10 hours per week.

 

PLAN OF OPERATIONS

 

Our Budget for operations in next fiscal year, 2018, is as follows:

 

APPLICATION OF FUNDS (1)

 

Professional fees  $20,000 
Total  $20,000 
      
(1) These items are variable and no commitment has been obtained from any source.     

 

 

 

 4 

 

 

We may change any or all of the budget categories in the execution of its business model. None of the line items are to be considered fixed or unchangeable. We may need substantial additional capital to support our budget. We have recognized no revenues from our existing operational activities.

 

We may need to raise additional funds to support not only our expected budget, but also our continued operations. We cannot make any assurances that we will be able to raise such funds or whether we would be able to raise such funds with terms that are favorable to us. We may seek to borrow monies from lenders at commercial rates, but such lenders will likely either deny us credit or lend at higher than bank rates, which higher rates could, depending on the amount borrowed, make the net operating income insufficient to cover the interest.

 

If we are unable to begin to generate enough revenue to cover our operational costs, we will need to seek additional sources of funds. Currently, we have no committed source for any funds as of date hereof. No representation is made that any funds will be available when needed. In the event funds cannot be raised if and when needed, we may not be able to carry out our business plan and could fail in business as a result of these uncertainties.

 

We intend to conduct research and development, market research, product formulation, and will continue to seek new business opportunities.

 

 

ITEM 1A. RISK FACTORS

 

An investment in our Company's securities involves a high degree of risk. You should carefully consider the following risk factors and all the other information contained in this document before you decide to buy our Company's shares. If any of the following risks related to our Company's business actually occurs, its business, financial condition and operating results would be adversely affected.

 

RISK FACTORS RELATED TO OUR COMPANY

 

Our securities are highly speculative and should be purchased only by persons who can afford to lose their entire investment in us. Each prospective investor should carefully consider the following risk factors, as well as all other information set forth elsewhere in this prospectus, before purchasing any of the shares of our common stock.

 

We have a lack of revenue history and investors cannot view our past performance since we are a start-up company.

 

We were formed on September 10, 2013 for the purpose of engaging in any lawful business and adopted a plan to engage in the traffic safety business. We have had one sales transaction since inception through Amazon.com for $1,725. We are not profitable and our historical business efforts have not been successful and have culminated in a spin-off. We must be regarded as a new or development venture with all of the unforeseen costs, expenses, problems, risks and difficulties to which such ventures are subject. We should be considered highly speculative.

 

We have limited working capital and limited cash funds.

 

Our capital needs are projected to be $20,000 during the next 12 months of operations. Such funds are not committed, at this time in any amount. Within the next six months additional financing requirements are projected to be $20,000. We currently have no agreements or known financing sources in place to meet these requirements.

 

We have limited funds, and such funds may not be adequate to carry out the business plan. We have limited funds (as of December 31, 2017, we had $733 in cash on hand), and such funds may not be adequate to carry out the business plan. The ultimate success of our Company may depend upon our ability to raise additional capital. We have investigated the availability, source, or terms that might govern the acquisition of additional capital. If additional capital is needed, there is no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to us. If not available, our operations will be limited to those that can be financed with our modest capital.

 

 

 

 5 

 

 

The ultimate success of our Company depends upon our ability to raise additional capital. Southeastern Holdings, Inc. has investigated the availability, source, or terms that might govern the acquisition of additional capital. If additional capital is needed, there is no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to Southeastern Holdings, Inc. If not available, Southeastern Holdings, Inc.’s operations will be limited to those that can be financed with its modest capital.

 

Our officers and directors may have conflicts of interest which may not be resolved favorably to us.

 

Certain conflicts of interest may exist between us and our officers and directors. Our Officers and Directors have other business interests to which they devote their attention and may be expected to continue to do so although management time should be devoted to our business. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with fiduciary duties to us. Our officer is only engaged part-time in this business – up to 10 hours per week.

 

We may in the future issue more shares which could dilute current stockholders.

 

We may issue further shares as consideration for the cash or assets or services out of our authorized but unissued common stock that would, upon issuance, represent more equity of our Company. The result of such an issuance would be those new stockholders and management would control our Company, and persons unknown could replace our management at this time. Such an occurrence could result in a greatly reduced percentage of ownership of our Company by our current shareholders and distributes and their purchasers in the event of resale, which could present significant risks to investors.

 

We will incur significant costs to be a public company to ensure compliance with U.S.. corporate governance and accounting requirements and we may not be able to absorb such costs.

 

We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect these costs to be approximately $50,000-$75,000 per year. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. In addition, we may not be able to absorb these costs of being a public company which will negatively affect our business operations.

 

We are an “emerging growth company,” and any decision on our part to comply only with certain reduced disclosure requirements applicable to “emerging growth companies” could make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an “emerging growth company,” we expect and fully intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

 

 

 6 

 

 

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)2(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to opt in to the extended transition period for complying with the revised accounting standards. We have elected to rely on these exemptions and reduced disclosure requirements applicable to “emerging growth companies” and expect to continue to do so.

 

We may not be able to meet the filing and internal control reporting requirements imposed by the SEC which may result in a decline in the price of our common shares and an inability to obtain future financing.

 

As directed by Section 404 of the Sarbanes-Oxley Act, as amended by SEC Release No. 33-8934 on June 26, 2008, the SEC adopted rules requiring each public company to include a report of management on the company’s internal controls over financial reporting in its annual reports. In addition, the independent registered public accounting firm auditing a company’s financial statements may have to also attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. We may be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement

 

·Of management’s responsibility for establishing and maintaining adequate internal control over its financial reporting;

 

·Of management’s assessment of the effectiveness of its internal control over financial reporting as of year end; and

 

·Of the framework used by management to evaluate the effectiveness of our internal control over financial reporting.

 

Furthermore, our independent registered public accounting firm may be required to file its attestation on whether it believes that we have maintained, in all material respects, effective internal control over financial reporting.

 

While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule. In the event that we are unable to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer.

 

In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the SEC, which could also adversely affect the market price of our Common Stock and our ability to secure additional financing as needed.

 

The JOBS Act allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies.

 

Since, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act, this election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

 

 

 7 

 

 

Our common shares will not initially be registered under the exchange act and as a result we will have limited reporting duties which could make our common stock less attractive to investors.

 

Our common shares are not registered under the Exchange Act. As a result, we will not be subject to the federal proxy rules and our directors, executive officers and 10% beneficial holders will not be subject to Section 16 of the Exchange Act. In additional our reporting obligations under Section 15(d) of the Exchange Act may be suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year. Our common shares are not registered under the Securities Exchange Act of 1934, as amended, and we do not intend to register our common shares under the Exchange Act for the foreseeable future, provided that, we will register our common shares under the Exchange Act if we have, after the last day of our fiscal year, more than either (i) 2000 persons; or (ii) 500 shareholders of record who are not accredited investors, in accordance with Section 12(g) of the Exchange Act. As a result, although, upon the effectiveness of the registration statement of which this prospectus forms a part, we will be required to file annual, quarterly, and current reports pursuant to Section 15(d) of the Exchange Act, as long as our common shares are not registered under the Exchange Act, we will not be subject to Section 14 of the Exchange Act, which, among other things, prohibits companies that have securities registered under the Exchange Act from soliciting proxies or consents from shareholders without furnishing to shareholders and filing with the Securities and Exchange Commission a proxy statement and form of proxy complying with the proxy rules. In addition, so long as our common shares are not registered under the Exchange Act, our directors and executive officers and beneficial holders of 10% or more of our outstanding common shares will not be subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act requires executive officers and directs, and persons who beneficially own more than 10% of a registered class of equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common shares and other equity securities, on Forms 3, 4 and 5, respectively. Such information about our directors, executive officers, and beneficial holders will only be available through this (and any subsequent) registration statement, and periodic reports we file thereunder. Furthermore, so long as our common shares are not registered under the Exchange Act, our obligation to file reports under Section 15(d) of the Exchange Act will be automatically suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has gone effective), we have fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.

 

Because our common stock is not registered under the Securities Exchange Act of 1934, as amended, our reporting obligations under section 15(d) of the Securities Exchange Act of 1934, as amended, may be suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year.

 

Our common stock is not registered under the Exchange Act, and we do not intend to register our common stock under the Exchange Act for the foreseeable future (provided that, we will register our common stock under the Exchange Act if we have, after the last day of our fiscal year, $10,000,000 in total assets and either more than 2,000 shareholders of record or 500 shareholders of record who are not accredited investors (as such term is defined by the Securities and Exchange Commission), in accordance with Section 12(g) of the Exchange Act). As long as our common stock is not registered under the Exchange Act, our obligation to file reports under Section 15(d) of the Exchange Act will be automatically suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has gone effective), we have fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.

 

Our articles of incorporation provide for indemnification of officers and directors at our expense and limit their liability which may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors.

 

Our By-Laws include provisions that eliminate the personal liability of the directors of the Company for monetary damages to the fullest extent possible under the laws of the State of Colorado or other applicable law. These provisions eliminate the liability of directors to the Company and its stockholders for monetary damages arising out of any violation of a director of his fiduciary duty of due care. Under Colorado law, however, such provisions do not eliminate the personal liability of a director for (i) breach of the director’s duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director derived an improper benefit. These provisions do not affect a director’s liabilities under the federal securities laws or the recovery of damages by third parties.

 

 

 

 8 

 

 

Reporting requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing and maintaining acceptable internal controls over financial reporting, are costly and may increase substantially.

 

The rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which will require that the Company engage legal, accounting, auditing and other professional services. The engagement of such services is costly. Additionally, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that we design, implement and maintain adequate internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel we have may make it difficult for us to design, implement and maintain adequate internal controls over financial reporting. In the event that we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports or report fraud, which may harm our overall financial condition and result in loss of investor confidence and a decline in our share price.

 

As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results.

 

We are not diversified and we will be dependent on only one business.

 

Because of the limited financial resources that we have, it is unlikely that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one area will subject us to economic fluctuations within the traffic safety industry and therefore increase the risks associated with our operations due to lack of diversification.

 

We will depend upon management but we will have limited participation of management (which could be detrimental to the business.).

 

We currently have two individuals who are serving as our officers and directors for up to 10 hours per week each on a part-time basis. Our directors are also acting as our officers. Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. We will be heavily dependent upon our officers skills, talents, and abilities, as well as several consultants to us, to implement our business plan, and may, from time to time, find that the inability of the officers, directors and consultants to devote their full-time attention to our business results in a delay in progress toward implementing our business plan. Once we achieve more funding – other consultants may be employed on a part-time basis under a contract to be determined. See "Management." Because investors will not be able to manage our business, they should critically assess all of the information concerning our officers and directors.

 

We may be unable to obtain and retain appropriate patent and trademark protection of our products and services.

 

We may seek to protect our intellectual property rights (if any) through patents, trademarks, trade names, trade secrets and a variety of other measures. However, these measures may be inadequate to protect our intellectual property (to the extent we have any) or other proprietary information.

 

·Trade secrets may become known by third parties. Our trade secrets or proprietary technology may become known or be independently developed by competitors.
·Rights to patents applications and trade secrets may be invalidated. Disputes may arise with third parties over the ownership of our intellectual property rights. Patents may be invalidated, circumvented or challenged, and the rights granted under the patent application that provide us with a competitive advantage may be nullified.
·Problems with future patent applications. Pending or future patent applications may not be approved, or the scope of the granted patent may be less than the coverage sought.
·Infringement claims by third parties. Infringement, invalidity, right to use or ownership claims by third parties or claims for indemnification may be asserted by third parties in the future. If any claims or actions are asserted against us, we can attempt to obtain a license for that third party's intellectual property rights. However, the third party may not provide a license under reasonable terms, or may not provide us with a license at all.
·Litigation may be required to protect any intellectual property rights. Litigation may be necessary to protect our intellectual property rights and trade secrets, to determine the validity of and scope of the rights of third parties or to defend against claims of infringement or invalidity by third parties. Such litigation could be expensive, would divert resources and management's time from our sales and marketing efforts, and could have a materially adverse effect on our business, financial condition and results of operations.

 

 

 

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We can give no assurance of success or profitability to our stockholders.

 

There is no assurance that we will ever operate profitably. There is no assurance that we will generate revenues or profits, or that the market price of our common stock will be increased thereby.

 

We have authorized and designated a Class “A” Preferred Super Majority Voting Stock, which having voting rights superior to our common stock.

 

Class “A” Preferred Super Majority Voting Stock (the “Class “A” Preferred Stock”) of which 10,000,000 shares of preferred stock have been authorized for the class and the shares have a deemed purchase price at $0.0001 per share. All 10,000,000 Class “A” Preferred shares have been issued to our CEO, Paul D. Dickman. The holder of the Class “A” Preferred Stock has the ability to vote equivalent of 60% of our common stock in any vote of the common stockholders. The Class “A” Preferred Stock would have a voting equivalent of 60%, if issued at this time.

 

We have agreed to indemnification of officers and directors as is provided by Colorado Statutes.

 

Colorado Statutes provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person’s promise to repay us therefore if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us that we will be unable to recoup.

 

Our directors’ liability to us and stockholders is limited

 

Colorado Statutes exclude personal liability of our directors and our stockholders for monetary damages for breach of fiduciary duty except in certain specified circumstances. Accordingly, we will have a much more limited right of action against our directors that otherwise would be the case. This provision does not affect the liability of any director under federal or applicable state securities laws.

 

Burden to investors.

 

The financial risk of our activities will be borne primarily by existing or new shareholders, who will have contributed a significantly greater portion of our capital, than prior investors.

 

We will incur expenses in connection with SEC Filing Requirements and we may not be able to meet such costs, which could jeopardize our filing status with the SEC. Those costs are estimated to be $20,000-$50,000 per year additional.

 

We will incur legal and accounting expenses as a result of being a public company in order to meet the filing requirements under the Securities and Exchange Act of 1934 (“34 Act”). We will see an increase in legal and accounting expenses as a result of such requirements. These costs can increase significantly if we are subject to comment from the SEC on its filings and/or is required to file supplemental filings for transactions and activities. If we are not compliant in meeting the filing requirements of the SEC, we could lose its status as a 1934 Act Company, which could compromise its ability to raise funds and to ever achieve trading status on the OTCBB.

 

RISK FACTORS RELATING TO OUR BUSINESS

 

We have a limited operating history. If we fail to generate revenues and profits in the future, we may exhaust our capital resources and be forced to discontinue operations.

 

We were organized in 2013 and have a limited operating history. The potential for us to generate profits depends on many factors, including the following:

 

·our ability to secure adequate funding to facilitate the anticipated business plan and goals of the Company;

 

·the size and timing of future client contracts, milestone achievement, service delivery and client acceptance;

 

·success in developing, maintaining and enhancing strategic relationships with potential business partners;

 

 

 

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·actions by competitors towards the development and marketing of technologies, products and services that will compete directly with ours;

 

·the costs of maintaining and expanding operations; and

 

·our ability to attract and retain a qualified work force.

 

We cannot assure you that we will achieve any of the foregoing factors or realize profitability in the immediate future or at any time.

 

We expect operating results to fluctuate significantly in the future as a result of a variety of factors, many of which are outside of our control. Factors that may adversely affect our operating results include, among others, demand of our products, the budgeting cycles of potential customers, lack of enforcement of or changes in governmental regulations or laws, the amount and timing of capital expenditures and other costs relating to the expansion of our operations, the introduction of new or enhanced products and services by us or our competitors, the timing and number of new hires, changes in our pricing policy or those of our competitors, the mix of products, increases in the cost of raw materials, technical difficulties, incurrence of costs relating to product design changes, general economic conditions, and market acceptance of our products. As a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing decisions or business combinations that could have a material adverse effect on our business, results of operations and financial condition. Any seasonality is likely to cause quarterly fluctuations in our operating results, and there can be no assurance that such patterns will not have a material adverse effect on our business, results of operations and financial condition. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall.

 

We may not be able to manage future growth effectively, which could adversely affect our operations and financial performance.

 

The ability to manage and operate our business as we execute our development and growth strategy will require effective planning. Significant rapid growth could strain management and internal resources and cause other problems that could adversely affect our financial performance. We expect that our efforts to grow will place a significant strain on personnel, management systems, infrastructure and other resources. Our ability to manage future growth effectively will also require us to successfully attract, train, motivate, retain and manage new employees and continue to update and improve our operational, financial and management controls and procedures. Further, our ability to successfully offer our products and implement our business plan in a rapidly evolving market requires an effective planning and management process. We plan to increase the scope of our operations domestically and our anticipated growth in future operations will continue to place, a significant strain on our management systems and resources. If we do not manage our growth effectively, our operations could be adversely affected, resulting in slower growth and a failure to achieve or sustain profitability.

 

We intend to rely on outside consultants, manufacturers and suppliers.

 

Once the company settles upon a new business model it is expected it will rely on the experience of outside consultants, manufacturers and suppliers. If one or more of these consultants, manufacturers, or suppliers terminates with us, or becomes unavailable, suitable replacements will need to be obtained and there is no assurance that such replacement could be obtained under conditions favorable to us.

 

Our Management has broad discretion in Budget usage.

 

We expect to use our limited capital for general corporate purposes, including working funds, capital expenditures, promotional and marketing expenditures and to fund anticipated operating losses. In addition, we may use an unspecified portion of any future capital raised to acquire or invest in complementary products, IP and technologies if a favorable opportunity to make such an acquisition or investment arises. In the ordinary course of business, we expect to evaluate potential acquisitions of products and technologies, which complement our business model. In addition, from time to time, we will evaluate the usage of cash to determine whether the then existing uses and apportionment should be changed. Accordingly, our management will have broad discretion in the application of our budgets. The failure of our management to apply funds effectively could have a material adverse effect on our business, results of operations and financial condition.

 

 

 

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Forward looking statements and associated risks.

 

This Form 10-K contains certain forward-looking statements, including among others: (i) the projected time for commencing operations; (ii) anticipated trends in our financial condition and results of operations; (iii) our business strategy for its plan of operations; and (iv) our ability to distinguish itself from its current and future competitors. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward looking statements. In addition to other risks described elsewhere in this “Risk Factors” discussion, important factors to consider in evaluating such forward-looking statements include (i) changes to external competitive market factors or in our internal budgeting process which might impact trends in our results of operations; (ii) anticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the industry in which we will operate; and (iv) various competitive factors that may prevent us form competing successfully in the marketplace. In light of these risks and uncertainties, many of which are described in greater detail elsewhere in this “Risk Factors” discussion, there can be no assurance that the events predicted in forward-looking statements contained in this Prospectus will in fact transpire.

 

Our continuation as a going concern is dependent on additional financing, as our operations are capital intensive and future capital expenditures are expected to be substantial.

 

Our future success is dependent on our ability to attract additional capital and ultimately, upon our ability to develop future profitable operations. There can be no assurance that we will be successful in obtaining such financing, or that it will attain positive cash flow from operations. Management believes that actions future actions to be taken to revise our operating and financial requirements may provide the opportunity for us to continue as a going concern.

 

RISK FACTORS RELATED TO OUR STOCK

 

A limited public market exists for our common stock at this time, and there is no assurance of a future market.

 

There is a limited public market for our common stock, and no assurance can be given that a market will continue or that a shareholder ever will be able to liquidate his investment without considerable delay, if at all. If a market should develop, the price may be highly volatile. Factors such as these discussed in the “Risk Factors” section may have a significant impact upon the market price of the shares offered hereby. Due to the low price of our securities, many brokerage firms may not be willing to effect transactions in our securities. Even if a purchaser finds a broker willing to effect a transaction in our shares, the combination of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of our shares as collateral for any loans.

 

Our stock, will in all likelihood be thinly traded and as a result you may be unable to sell at or near ask prices or at all if you need to liquidate your shares.

 

The shares of our common stock may be thinly-traded. We are a small company which is relatively unknown to stock analysts, stock brokers, institutional stockholders and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of any of our securities until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our securities is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on Securities price. We cannot give you any assurance that a broader or more active public trading market for our common Securities will develop or be sustained, or that any trading levels will be sustained. Due to these conditions, we can give stockholders no assurance that they will be able to sell their shares at or near ask prices or at all if they need money or otherwise desire to liquidate their securities.

 

Our common stock may be volatile, which substantially increases the risk that you may not be able to sell your securities at or above the price that you may pay for the security.

 

If we are able to obtain an exchange listing of our common stock in the future, because of the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so. The inability to sell your securities in a rapidly declining market may substantially increase your risk of loss because of such illiquidity and because the price for our securities may suffer greater declines because of our price volatility.

 

 

 

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The price of our common stock that will prevail in the market after this offering may be higher or lower than the price you may pay. Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to the following:

 

·Variations in our quarterly operating results;
·Loss of a key relationship or failure to complete significant transactions;
·Additions or departures of key personnel; and
·Fluctuations in stock market price and volume.

 

Additionally, in recent years the stock market in general, has experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance. In the past, class action litigation often has been brought against companies following periods of volatility in the market price of those companies common stock. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on your investment in our stock.

 

The regulation of penny stocks by the SEC and FINRA will discourage the tradability of our securities.

 

We are a “penny stock” company, as our stock price is less than $5.00 per share. Even if we were able to obtain an exchange listing for our stock, we cannot make an assurance that we will be able to maintain a stock price greater than $5.00 per share and if the share price was to fall to such prices, that we wouldn’t be subject to the “Penny Stocks” rules. None of our securities currently trade in any market and, if ever available for trading, will be subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited stockholders. For purposes of the rule, the phrase “accredited stockholders” means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $10,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Very few brokers now affect such trades. Consequently, the rule will affect the ability of purchasers in this offering to sell their securities in any market that might develop therefore because it imposes additional regulatory burdens on penny stock transactions.

 

In addition, the Securities and Exchange Commission has adopted a number of rules to regulate “penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute “penny stocks” within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional regulatory burdens on penny stock transactions.

 

Investors should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.

 

Investors in penny stocks have limited remedies in the event of violations of penny stock rules. While the courts are always available to seek remedies for fraud against us, most, if not all, brokerages require their customers to sign mandatory arbitration agreements in conjunctions with opening trading accounts. Such arbitration may be through an independent arbiter. Stockholders may file a complaint with FINRA against the broker allegedly at fault, and FINRA may be the arbiter, under FINRA rules. Arbitration rules generally limit discovery and provide more expedient adjudication, but also provide limited remedies in damages usually only the actual economic loss in the account. Stockholders should understand that if a fraud case is filed an against a company in the courts it may be vigorously defended and may take years and great legal expenses and costs to pursue, which may not be economically feasible for small stockholders.

 

 

 

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Without arbitration agreements, specific legal remedies available to stockholders of penny stocks include the following:

 

If a penny stock is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.

 

If a penny stock is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.

 

The fact that we are a penny stock company will cause many brokers to refuse to handle transactions in the stocks, and will discourage trading activity and volume, or result in wide disparities between bid and ask prices. These may cause stockholders significant illiquidity of the stock at a price at which they may wish to sell or in the opportunity to complete a sale. Stockholders will have no effective legal remedies for these illiquidity issues.

 

We will pay no foreseeable dividends in the future.

 

We have not paid dividends on our common stock and do not ever anticipate paying such dividends in the foreseeable future. Stockholders whose investment criteria are dependent on dividends should not invest in our common stock.

 

Rule 144 sales in the future may have a depressive effect on our stock price.

 

All of the outstanding shares of common stock are held by our present officers, and directors, stockholders as "restricted securities" within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who has held restricted securities for six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1.0% of a company's outstanding common stock or the average weekly trading volume during the four calendar weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by a non-affiliate after the owner has held the restricted securities for a period of six months. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop.

 

Our stockholders may suffer future dilution due to issuances of shares for various considerations in the future.

 

There may be substantial dilution to our stockholders as a result of future decisions of the Board to issue shares without shareholder approval for cash, services, or acquisitions.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None

 

ITEM 2. DESCRIPTION OF PROPERTIES

 

Our mailing address is 19 Old Town Square, Suite #238, Fort Collins, CO 80524. The Company does not hold any real property. The officers operate virtually via the internet.

 

ITEM 3. LEGAL PROCEEDINGS

 

To the best of our knowledge and belief, there is no pending legal action against the Company.

 

 

 

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ITEM 4. MINE SAFETY DISCLOSURE.

 

Not Applicable.

PART II

 

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth the range of high and low sales prices for the Company’s common stock for each of the fiscal quarters for the past two years as reported on the OTC Bulletin Board. These prices represent inter-dealer prices without adjustments for mark-up, mark-down, or commission and do not necessarily reflect actual transactions.


Our common stock’s trading symbol is “SFLL”. As of January 18, 2018, there have been no public sales transactions.

 

Holders. As of December 31, 2017, there were approximately 3 holders of record of the common stock. We believe that we have approximately 50 beneficial owners of our common stock. In many instances, a registered stockholder is a broker or other entity holding shares in street name for one or more customers who beneficially own the shares.

 

The Company has engaged Mountain Share Transfer, Inc., P.O. Box 191767, Atlanta, Georgia 31119, phone (303) 460-1149/ fax (404) 816-8830 as its transfer agent for its securities.

 

Dividends. We have not paid or declared cash distributions or dividends on our common stock and do not intend to pay cash dividends in the foreseeable future due to our illiquidity and inability to support operations to support our operations without funding from our officers, directors and shareholders. Future cash dividends will be determined by our board of directors based upon our earnings, financial condition, capital requirements and other relevant factors. We cannot provide any assurances or guarantees that any agreement for financing will not provide for restrictions on any future dividend payments, though our existing promissory notes do not have any such provisions.

 

Recent Sales of Unregistered Securities

 

We made no unregistered sales of our securities from January 1, 2015 through December 31, 2017.

 

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

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

 

The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.

 

 

 

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The independent registered public accounting firm’s report on the Company’s consolidated financial statements as of December 31, 2017, and for each of the years in the two-year period then ended, includes a “going concern” explanatory paragraph, that describes substantial doubt about the Company’s ability to continue as a going concern.

 

General

 

The Company was incorporated in Colorado in September of 2013 and redomiciled to become a Delaware Holding Corporation in September of 2016.

 

On September 22, 2016, the Company formed two wholly owned subsidiaries, SLS Industrial, Inc. and Southeastern Holdings, Inc. (both Delaware corporations).

 

On September 30, 2016, the Company merged with SLS Industrial, Inc., which became the surviving entity. SLS Industrial, Inc. and Southeastern Holdings, Inc. then restructured to a Delaware holdings structure, in which SLS Industrial, Inc., became a wholly owned subsidiary of Southeastern Holdings, Inc. The Companies restructured under a plan of merger and reorganization, in which the then-outstanding 25,118,273 shares of common stock, 10,000,000 shares of Class A Preferred Stock and 0 shares of Class B Preferred Stock would ultimately translate 1 for 1 to the same interests in Southeastern Holdings, Inc.

 

On December 1, 2016, the Company spun off its wholly owned subsidiary, SLS Industrial, Inc., leaving Southeastern Holdings as the only surviving entity.

 

We are in the developmental stage of our business. Since our incorporation September 2013, we have been engaged in securing both exclusive and non-exclusive license agreements for our key products, designing a marketing plan, and lining up suppliers and manufacturers for production.

 

PLAN OF OPERATIONS

 

We did not have any revenues and did not recognize any income from continuing operations as of December 31, 2017. We have negative capital and no intangible assets. We are illiquid and need cash infusions from investors or shareholders to provide capital, or loans from any sources, none of which have been arranged nor assured.

 

We are currently seeking new business opportunities. Our goals for the next year are to pursue and engage in business opportunities and generate additional capital to fund such endeavors.

 

Our Goals for the next year are as follows:

 

Future Milestones

 

  · Generate additional capital to allow us to fund and develop new products and marketing
  · Develop new products and pursue new business opportunities
·Fully implement direct and online sales marketing strategy

 

Our Budget for operations through the first quarter of 2018 is as follows:

 

APPLICATION OF FUNDS (1)

 

Professional fees  $20,000 
Total  $20,000 
      
(1) These items are variable and no commitment has been obtained from any source.     

 

 

 

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The Company may change any or all of the budget categories in the execution of its business model. None of the line items are to be considered fixed or unchangeable. The Company may need substantial additional capital to support its budget.

  

OFF BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet arrangements.

 

Our Budget for operations in next year is as follows:

 

     
Professional fees  $20,000 
Total expenses  $20,000 

 

We will need substantial additional capital to support our future operations. We have no revenues and have no committed source for any funds as of date here. No representation is made that any funds will be available when needed. In the event funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales or royalty income, and could fail in business as a result of these uncertainties. If our initial prospect appears uneconomical after evaluation we will seek other prospects it the area to acquire or farm into.

 

We may also consider a private placement or public offering of our common stock, if the market conditions allow at the time. No price, schedule or terms for such an offering has been determined at this time. We expect to expend funds on a quarterly basis, as follows:

 

Cash on Hand  $(733)
2nd Quarter 2018  $0 
3rd  Quarter 2018  $0 
4th  Quarter 2018  $12,000 
1st Quarter 2019  $8,000 
Total  $19,267 

 

Results of Operations for the Years Ended December 31, 2017 and December 31, 2016

 

There were no revenues in the years ended December 30, 2017 and 2016. However, there was one sale on the amazon.com platform resulting in $1,725 in revenue in the period ended December 31, 2016. This revenue, however, pertained to the operations that were subsequently spun off in December 2016.

 

Expenses decreased from $119,387 for the year ended December 31, 2016 to $2,265 for the year ended December 31, 2017. This decrease was primarily related to a reduction in needs for outside services. The marketing and sales staff were terminated in the first quarter of 2016 as the Company determined it needed to spend additional effort developing its products prior to executing its sales plan.

 

Liquidity and Capital Resources

 

During the year ended December 31, 2017 the Company received $0 from the issuance of notes payable as compared to $7,500 received in the year ended December 31, 2016.

 

During the twelve months ending December 31, 2018 the Company estimates it will need a minimum of approximately $1,250,000 to implement its business plan. Other than the foregoing, the Company does not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on sales, revenues or income from continuing operations, or liquidity and capital resources.

 

Short Term.

 

On a short-term basis, we do not generate any revenue or revenues sufficient to cover operations. Based on prior history, we will continue to have insufficient revenue to satisfy current and recurring liabilities as it seeks explore.

 

 

 

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No commitments to provide additional funds have been made by our management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to us to allow it to cover our expenses as they may be incurred.

 

Capital Resources

 

We have only common stock and notes payable as our capital resource.

 

Need for Additional Financing

 

We do not have capital sufficient to meet our cash needs. We will have to seek loans or equity placements to cover such cash needs. Once full business operations commences, our needs for additional financing is likely to increase substantially.

 

Within the next twelve months we will need to secure an additional $1,250,000 in financing to implement our plan of operations. After the twelve month period we will need to secure an additional $10,000,000 in financing to fully implement our plan of operations. If we are unable to secure required funding, it may be unable to continue operations.

 

No commitments have been made to provide additional by our management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to us to allow it to cover our expenses as they may be incurred.

 

Material Agreements

 

We previously owned a License (Master IP License) which required us to commence Sales and Manufacture under the License by January 1, 2016. Similarly our Sub License (non exclusive) provided that we must commence sales/manufacturing by January 1, 2016. We completed the requirement with one sale via Amazaon.com. In December 2016, we sold this license as part of a division spin-off.

 

Critical Accounting Policies

 

Cash and Cash Equivalents

 

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

 

Impairment of Long-life Assets

In accordance with ASC Topic 360, the Company reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Income Tax

 

The Company accounts for income taxes under ASC 740, “Income Taxes.” Under ASC 740, deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

 

 

 18 

 

 

Fiscal year

 

The Company employs a fiscal year ending December 31.

 

Net Income (Loss) per share

 

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding.  Warrants, stock warrants, and common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.

 

Revenue Recognition

 

The Company is currently pursuing new business opportunities and consequently has not produced revenues. The Should the Company generate revenues in the future, it will recognize such revenues in accordance with ASC 606, “Contracts with Customers.”

 

Financial Instruments

 

The carrying value of the Company’s financial instruments, including cash and cash equivalents, as reported in the accompanying balance sheet, are stated at fair value.

 

Stock-Based Compensation

 

The Company adopted the provisions of and accounts for stock-based compensation using an estimate of value in accordance with the fair value method. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which generally is the vesting period. The Company elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation method applies to new grants and to grants that were outstanding as of the effective date and are subsequently modified.

 

Fair Value of Financial Instruments

 

The carrying amount of accounts payable is considered to be representative of respective fair values because of the short-term nature of these financial instruments.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Our financial statements and supplementary data are included herein commencing on page 20.

 

 

 

 

 19 

 

 

SOUTHEASTERN HOLDINGS, INC.

 

FINANCIAL STATEMENTS

 

For the years ended December 31, 2017 and 2016

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   21
     
CONSOLIDATED BALANCE SHEETS   22
     
CONSOLIDATED STATEMENTS OF OPERATIONS   23
     
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT   24
     
CONSOLIDATED STATEMENTS OF CASH FLOWS   25
     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   26

 

 

 

 20 

 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of Southeastern Holdings, Inc. (Formerly Safe Lane Systems, Inc.)

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Southeastern Holdings, Inc. (the "Company") as of December 31, 2017 and 2016, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, 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 December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

 

Our audit 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 audit 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 audit provides a reasonable basis for our opinion.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

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 significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company's auditor since 2014.

Lakewood, CO

August xx, 2018

 

 

 

 21 

 

 

Southeastern Holdings, Inc.

Balance Sheets

   

 

   December 31, 
   2017   2016 
         
ASSETS          
Current Assets:          
Cash and cash equivalents  $733   $743 
Total Current Assets   733    743 
           
           
TOTAL ASSETS  $733   $743 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)          
Current Liabilities:          
Accounts payable  $32,424   $35,219 
Accrued expenses   1,811    1,011 
Related party advances   8,306    4,056 
Unsecured short-term notes payable        
Accrued interest   150     
Total Current Liabilities   42,691    40,286 
           
Non-Current Liabilities:          
Convertible notes payable   1,500    1,500 
Total Non-Current Liabilities   1,500    1,500 
           
Total Liabilities   44,191    41,786 
           
Stockholders' Equity (Deficiency):          
Class A super voting preferred stock, $0.0001 par value; 10,000,000 shares authorized, issued and outstanding as of each, December 31, 2017 and 2016.   1,000    1,000 
Class B non-voting preferred stock, $0.0001 par value, 50,000,000 shares authorized, 0 and 0 issued and outstanding as of December 31, 2017 and 2016, respectively.        
Common Stock, $0.0001 par value, 500,000,000 shares authorized, 40,000,000 issued and outstanding as of each December 31, 2017 and 2016   4,000    4,000 
Additional paid-in capital   801    801 
Accumulated deficit   (49,259)   (46,844)
Total Stockholders' Equity (Deficiency)   (43,458)   (41,043)
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)  $733   $743 

 

 

The accompanying notes are an integral part of these financial statements

 

 

 

 22 

 

 

Southeastern Holdings, Inc.

Statements of Operations

   

 

   Year Ended December 31, 
   2017   2016 
         
         
Ordinary Income/Expense          
Revenue  $   $ 
Total Revenue        
           
Operating Expenses:          
Professional and contract expense   1,455    63,429 
Professional fees to related party       48,600 
General and administrative expense   810    5,796 
Impairment expense       1,562 
Total Operating Expenses   2,265    119,387 
           
Loss from operations   (2,265)   (119,387)
           
Other Income and Expense          
Amortization expense       (149)
Interest expense   (150)   (15,236)
Gain on extinguishment of debt       486,270 
Total Other Income (Expense)   (150)   470,885 
           
Net Income/(Loss)  $(2,415)  $351,498 
           
           
Net Income/(Loss) per share (basic and diluted)  $(0.00)  $0.01 
           
Weighted average number of common shares outstanding   28,838,705    24,768,273 

 

 

The accompanying notes are an integral part of these financial statements

 

 

 23 

 

 

Southeastern Holdings, Inc.

Statement of Stockholders' Equity

 

  Common Stock    Preferred Stock Class A   Preferred Stock Class B             
  Number of Shares   Amount   Number of Shares   Amount   Number of Shares   Amount   Additional Paid-In Capital   Accumulated Deficit   Total Stockholders' Equity (Deficiency) 
Balance, December 31, 2015   25,118,273   $2,512    10,000,000   $1,000       $   $801   $(398,342)  $(394,029)
Stock issued for services   14,881,727    1,488        1,488                          
Net loss   351,498    351,498                                    
Balance, December 31, 2016   40,000,000    4,000    10,000,000    1,000            801    (46,844)   (41,043)
Net loss   (2,415)   (2,415)                                   
Balance, December 31, 2017   40,000,000   $4,000    10,000,000   $1,000       $   $801   $(49,259)  $(43,458)

 

The accompanying notes are an integral part of these financial statements

 

 24 

 

 

Southeastern Holdings, Inc.

Statements of Cash Flows

 

  Year Ended December 31, 
   2017   2016 
Cash Flows from Operating Activities          
Net Loss  $(2,415)  $351,498 
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:          
Amortization       149 
Stock-based compensation       1,488 
Gain on extinguishment of debt       (486,270)
Impairment of patent sublicense       1,562 
Changes in operating assets and liabilities:          
Accounts payable   (2,795)   76,231 
Other accrued liabilities   950    16,247 
Net Cash Used in Operating Activities   (4,260)   (39,095)
           
Cash Flows from Investing Activities          
Cash paid in connection with sale of business unit       (1,000)
Net Cash Used in Investing Activities       (1,000)
           
Cash Flows from Financing Activities          
Superior Traffic Controls loan       20,000 
Issuance of convertible notes payable       7,500 
Repayments of convertible notes payable       (6,000)
Advances from related party   4,250    4,056 
Net Cash Provided by Financing Activities   4,250    25,556 
           
Net Change In Cash   (10)   (14,539)
           
Cash at Beginning of Period   743    15,282 
Cash at End of Period  $733   $743 

 

The accompanying notes are an integral part of these financial statements

 

 

 25 

 

 

SOUTHEASTERN HOLDINGS, INC.

Notes to the Consolidated Financial Statements

As of and for the Years Ended December 31, 2017 and 2016

(Audited)

 

NOTE 1.  ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

 

SAFE LANE SYSTEMS, INC. (the “Company”), was incorporated in the State of Colorado on September 10, 2013. The Company was formed to engage in the sale of traffic safety equipment. The Company may also engage in any other business permitted by law, as designated by the Board of Directors of the Company. During the second quarter of 2014 the Company secured a perpetual license to all of the intellectual property of Superior Traffic Control in exchange for the issuance of nonvoting convertible stock in the company. In the second quarter of 2016 the Company determined that license and related intellectual property should be written off as worthless due to problems with the engineering provided and the inability to obtain meaningful sales. The Company redomiciled to become a Delaware Holding Corporation in September of 2016.

 

On September 22, 2016, the Company formed two wholly owned subsidiaries, SLS Industrial, Inc. and Southeastern Holdings, Inc. (both Delaware corporations).

 

On September 30, 2016, the Company merged with SLS Industrial, Inc., which became the surviving entity. SLS Industrial, Inc. and Southeastern Holdings, Inc. then restructured to a Delaware holdings structure, in which SLS Industrial, Inc., became a wholly owned subsidiary of Southeastern Holdings, Inc. The Companies restructured under a plan of merger and reorganization, in which the then-outstanding 25,118,273 shares of common stock, 10,000,000 shares of Class A Preferred Stock and 0 shares of Class B Preferred Stock would ultimately translate 1 for 1 to the same interests in Southeastern Holdings, Inc.

 

On December 1, 2016, the Company spun off its wholly owned subsidiary, SLS Industrial, Inc., along with its assets and liabilities, leaving Southeastern Holdings, Inc. as the only surviving entity. Immediately prior to the date of the spin-off, the subsidiary held fully impaired intellectual property and owed net liabilities of $527,270, comprised of $415,000 of convertible debt, $30,178 of accrued unpaid interest on that debt and $82,092 of accounts payable pertaining to professional fees. The Company effected the spinoff by transferring its entire equity interest in SLS Industrial, Inc. in exchange for assuming $40,000 of the outstanding accounts payable and issuing payment of $1,000 cash to the buyer. As a result, the Company recognized a debt extinguishment gain of $486,270 in 2016.

 

The Company, Southeastern Holdings, Inc., is currently pursuing new business opportunities.

 

Fiscal year - The Company employs a fiscal year ending December 31.

 

Basis of Presentation - The accompanying financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information and the instructions to Form 10-K and Article 10 of Regulation S-X. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position and cash flows. All such adjustments are of a normal, recurring nature.

 

Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Reclassifications - Certain amounts in the prior period’s financial statements have been reclassified to conform to the current quarter’s presentation and to correct prior period errors.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. As of December 31, 2017 and 2016, the Company had cash and cash equivalents of $733 and $743, respectively.

 

 

 

 26 

 

 

SOUTHEASTERN HOLDINGS, INC.

Notes to the Consolidated Financial Statements

As of and for the Years Ended December 31, 2017 and 2016

(Audited)

 

Cash Flows - During the year period ending December 31, 2017, the Company primarily utilized cash proceeds from an unsecured short term loan to fund its operations.

 

Cash flows used by operations for the periods ended December 31, 2017 and 2016 were $4,260 and $40,095, respectively.

 

Impairment of Long-life Assets

 

In accordance with ASC Topic 360, the Company reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. As discussed in Note 1, the Company determined that the patent sublicense was completely impaired as of December 31, 2016, resulting in impairment expense of $1,562 for 2016.

 

Intangible Assets, Patents

 

During the second quarter of 2014 fiscal year the Company acquired the exclusive license rights and intellectual property for the patent of the Kone General device which expires July 2022. As payment for the license rights the company agreed to issue 22,768,273 shares of class B preferred, nonvoting shares to the shareholders of the original license holders “Superior Traffic Controls”. The Company accounts for its patent sub-license in accordance with ASC 350-30-30 “Intangibles – goodwill and other” and 805-50-30 and 805-50-15 related to “Business Combinations” by recognizing the fair value to the amount paid by the company for the asset at the time of purchase. Since Safe Lanes Systems has a limited operating history management determined to use par value as the value recognized for the transaction. Since the patent has a predetermined, finite life span, the cost of the asset will be recognized on a straight line basis over the remaining life of the patent. In addition, each period the Company will evaluate the intangible asset for impairment. During the year ended December 31, 2016, the Company determined the patent sublicense was completely impaired.

 

Amortization expense for the year ended December 31, 2016 was $149. The Company spun off its rights to the patents in the fourth quarter of 2016 in connection with the business spin-off.

 

Accounts payable and accrued liabilities

 

Accounts payable and accrued liabilities consisted of accrued interest of $150 and $0 at December 31, 2017 and December 31, 2016, respectively. Accounts payable and accrued expenses pertaining to professional fees totaled $34,924 and $35,219 as of December 31, 2017 and 2016, respectively.

 

As of December 31, 2017 and 2016, accrued expenses were $1,811 and $1,011, respectively and consisted of Delaware franchise taxes and various other fees and penalties associated with the late filings.

 

During 2017 and 2016, the CEO advanced $4,250 and $4,056, respectively for professional fees on behalf of the Company, resulting in related party advances due to the CEO in the amounts of $8,306 and $4,056 as of December 31, 2017 and 2016, respectively.

 

Unsecured, short-term notes payable

 

The Company received funding in the form of an informal loan from the original holder of the license to the Kone-General patent loan license agreement in the year ending December 31, 2013. The company formalized an unsecured, short-term note at 4% from this group in the second quarter of 2014. As of December 31, 2015 the Company had received total funding of $395,000 and through December 31, 2016 the Company received an additional $20,000 in funding on this loan for a total of $415,000. The company recognized $12,178 in interest expense related to these loans in the year ended December 31, 2016. These notes, totaling $415,000, were due to be repaid December 31, 2016 but were not repaid at that time.

 

 

 

 27 

 

 

SOUTHEASTERN HOLDINGS, INC.

Notes to the Consolidated Financial Statements

As of and for the Years Ended December 31, 2017 and 2016

(Audited)

 

Immediately prior to the date of the spin-off, the subsidiary held fully impaired intellectual property and owed net liabilities of $527,270, including $415,000 of this unsecured convertible debt and $30,178 of accrued unpaid interest on the notes. The Company effected the spinoff by transferring its entire equity interest in SLS Industrial, Inc. in exchange for assuming $40,000 of the outstanding accounts payable and issuing payment of $1,000 cash to the buyer. As a result, the Company recognized a total debt extinguishment gain of $486,270 in 2016.

 

Convertible Notes Payable

 

In July 2016, the Company entered into $7,500 of convertible notes, of which $1,500 were held by the CEO and $6,000 by the CEO’s friends and family. These notes bear interest at 10% per annum, with accrual of interest commencing after December 31, 2016 and mature on December 31, 2018. The agreements define a trigger event as the sale of preferred stock at a stated value of $100,000 and a material funding as $500,000. Terms of the notes permit the noteholders to convert the debt into 4.026% of the Company’s then-outstanding common stock any time between the trigger event and a material funding. Any time on or after maturity, the noteholders may either call the debt or elect to continue holding the debt at the 10% annual interest rate.

 

The Company evaluated the possibility that a beneficial conversion feature or derivative liability may exist on these notes and concluded that the Company’s stock value would render both features worthless or trivial and therefore did not record a beneficial conversion feature or derivative liability.

 

In December 2016, the Company issued payment for $6,000 of these notes, leaving an outstanding balance of $1,500 due to the CEO as of each December 31, 2017 and 2016. As of and for the year ended December 31, 2017, accrued interest and interest expense on these convertible notes was $150 and $0, all respectively.

 

Stockholders’ Equity

 

At December 31, 2017 and December 31, 2016, the Company was authorized to issue 500,000,000 shares of common stock, $0.0001 par value per share. In addition, 10,000,000 shares of Class A preferred super majority voting stock, $.0001 par value and 50,000,000 shares of Class B preferred, $.0001 par value nonvoting convertible shares were authorized. All common stock shares have full dividend rights. However, it is not anticipated that the Company will be declaring distributions in the foreseeable future.

 

Upon formation, the Company sold the founder 2,000,000 shares of $0.0001 par value common stock for $1,000 cash. Also upon formation, the Company paid the founder stock based compensation for services rendered of 10,000,000 shares of $0.0001 par value class A preferred super majority voting stock. These preferred shares have a stated value of par value of $0.0001. The holder of the Class Stock shall have the right to vote on any matter with holders of Common Stock and may vote as required on any action, which Colorado law provides may or must be approved by vote or consent of the holders of the specific series of voting preferred shares and the holders of common shares. The Record Holders of the Class B Preferred Shares shall have that number of votes equal to that number of common shares which is not less than 60% of the vote required to approve any action, which Colorado law provides may or must be approved by vote or consent of the holders of other series of voting preferred shares and the holders of common shares or the holders of other securities entitled to vote, if any.

 

Upon execution of a patent sublicense agreement the Company issued 22,768,273 shares of its class B preferred convertible stock to a trustee on behalf of shareholders of the original license agreement. These shares were convert into regular common stock when the company registering the underlying shares with the SEC and listing of the shares on a recognized exchange. During the year ended December 31, 2015 all of these shares were retired and common shares were issued on a 1 to 1 basis to replace them.

 

 

 

 28 

 

 

SOUTHEASTERN HOLDINGS, INC.

Notes to the Consolidated Financial Statements

As of and for the Years Ended December 31, 2017 and 2016

(Audited)

 

During the fourth quarter of 2015, the Company issued 350,000 shares of common stock to various individuals in consideration of their services rendered in support of the Company resulting in the company recognizing compensation expense of $35 based upon the declared par value of the Company’s common stock since there has been no market price sale of the Companies stock as of this point.

 

In the third quarter of 2016 the Company issued 14,881,727 shares to a trust to be disbursed at the trustee’s direction as insurance in lieu of purchasing D&O insurance. As the Company has issued no stock for cash, the Company’s assets are inconsequential and there is no active market for this stock, the Company determined that the stock’s value is inconsequential and valued the transaction based upon par value of $.0001 per share, resulting in general and administrative expense of $1,488 during 2016. 

 

As of each December 31, 2017 and 2016, 40,000,000 common shares, 10,000,000 Class A Preferred Shares and 0 Class B Preferred shares were issued and outstanding.

 

Professional and contractor expenses

 

Professional and contractor expenses consisted of $0 and $48,600, respectively, of contract management fees for the years ended December 31, 2017 and 2016, respectively. The remaining $1,455 and $63,429, respectively, for the years ended December 31, 2017 and 2016 were related to other professional services. 

 

Stock Based Compensation

 

The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock. In the year ended December 31, 2016 all shares awarded were valued at par value.

 

Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 when stock is given for previous service without further recourse.

 

The following table summarizes share-based compensation expense recorded in selling, general and administrative expenses during each period presented:

 

   December 31, 2017   December 31, 2016 
Stock issued       14,881,727 
Total share-based compensation expense  $   $1,488 

 

Management determined that the value of the stock was negligible, given no historical stock sales, no significant assets and the lack of a market for its common stock, and therefore used the par value of $0.0001 to determine stock compensation expense.

 

Income Tax

 

Income taxes are accounted for under the asset and liability method of ASC 740. Deferred tax assets and liabilities are recognized for net operating loss and other credit carry forwards and the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the tax effect of transactions are expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the year that includes the enactment date.

 

Deferred tax assets are reduced by a full valuation allowance since it is more likely than not that the amount will not be realized. Deferred tax assets and liabilities are classified as current or noncurrent based on the classification of the underlying asset or liability giving rise to the temporary difference or the expected date of utilization of the carry forwards.

 

 

 

 29 

 

 

SOUTHEASTERN HOLDINGS, INC.

Notes to the Consolidated Financial Statements

As of and for the Years Ended December 31, 2017 and 2016

(Audited)

 

The Company calculates taxes using a blended tax rate of 34%. A summary of deferred tax assets is as follows:

 

  As of December 31, 
   2017   2016 
Deferred Tax Assets:          
Net operating losses  $255,543   $254,722 
Deferred Tax Liabilities:          
Depreciation, amortization, other        
Deferred tax asset   255,543    254,722 
Less: valuation allowance   (255,543)   (254,722)
Deferred tax asset, net  $   $ 

 

The Company did not file its Delaware franchise taxes for 2016, resulting in penalties and interest of $211. These are reflected in the accrued expense balance of $1,011 as of December 31, 2016.

 

Gain on Extinguishment of Debt

 

Immediately prior to the spin-off on December 1, 2016, the subsidiary held fully impaired intellectual property and owed net liabilities of $527,270, comprised of $415,000 of convertible debt, $30,178 of accrued unpaid interest on that debt and $82,092 of accounts payable pertaining to professional fees. The Company effected the spinoff by transferring its entire equity interest in SLS Industrial, Inc. in exchange for assuming $40,000 of the outstanding accounts payable and issuing payment of $1,000 cash to the buyer. As a result, the Company recognized a debt extinguishment gain of $486,270 in 2016, as follows:

 

Accounts payable  $42,092 
Short-term unsecured notes   415,000 
Accrued interest on notes   30,178 
Total liabilities transferred   487,270 
Less: cash paid   (1,000)
Gain on extinguishment of debt  $486,270 

 

Net Income (Loss) per share

 

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding.  Warrants, stock options, and common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.

 

Revenue Recognition

 

Revenue is generated from the sale of its product and is recognized on an accrual basis as earned once the product is shipped and collection has occurred. The company has only had one sale which was processed through the e-commerce site amazon.com. When the sale was completed through their platform, payment was received and the product was shipped. Upon shipment the revenue was recognized.

 

Revenue from licensing services is recognized when the obligations to the client are fulfilled which is determined when particular milestones in the contract are achieved. Revenue from Seminar fees is related to one day seminars and is recognized as earned at the completion of the seminar. All revenue is measured at fair value.

 

 

 

 30 

 

 

SOUTHEASTERN HOLDINGS, INC.

Notes to the Consolidated Financial Statements

As of and for the Years Ended December 31, 2017 and 2016

(Audited)

 

Financial Instruments

 

The carrying amounts of cash and current assets and liabilities approximate fair value because of the short-term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. Available for sale securities are recorded at current market value as of the date of the report.

 

Going Concern and Management’s Plans

 

As shown in the accompanying financial statements as of December 31, 2017, the Company had cash reserves of only $733, an accumulated deficit of $49,259, no history of generating revenue, and has incurred substantial operating losses, net of any non-cash GAAP- basis gains, such as extinguishment of debt.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

 

Recent Accounting Pronouncements

 

The Company has reviewed all recently issued but not yet effective accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or results of operations.

 

Related Party Transactions

 

The Company pays its Chief Executive Officer, Paul Dickman through Mr. Dickman’s consulting company, Breakwater Finance, LLC. For the year ended December 31, 2017 and December 31, 2016, management and accounting fees were $0 and $48,600, respectively.

 

During 2017 and 2016, the Company paid $0 and $8,000, respectively, in consulting fees to a relative of the CEO for developing various aspects of the Company’s prior business model and product.

 

During 2017 and 2016, the CEO advanced the Company $4,250 and $4,056, respectively, for accrued advances due to him of $8,306 and $4,056 as of December 31, 2017 and 2016, respectively.

 

Mr. Dickman, who is also a greater-than-5% shareholder, holds 10,000,000 shares of Class A Supervoting preferred stock, which effectively entitles him to at least 60% of voting interests in any common shareholder vote.

 

Subsequent Events

 

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

 

Management has evaluated subsequent events through the date of this filing, noting that there were no other material events requiring disclosure or adjustment.

 

 

 31 

 

 

EXHIBIT ONE

 

SAFE LANES SYSTEM

FINAL FINANCIAL STATEMENT AS OF SEPTEMBER 30, 2016

 

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

 

Safe Lane Systems, Inc.

Balance Sheet

 

 

   (unaudited)   (audited) 
   September 30,
2016
   December 31,
2015
 
   Restated     
Assets
Current Assets          
Cash and cash equivalents  $7,871   $15,282 
Total Current Assets   7,871    15,282 
           
Non-current Assets          
Patent Sublicense, net       1,831 
Total Non-current Assets       1,831 
           
Total Assets  $7,871   $17,113 
           
Liabilities and Stockholders' Equity 
Commitments and Contingencies          
Current Liabilities          
Accounts Payable   42,092    1,080 
Accrued Expense   11,308     
Unsecured, short-term notes payable   415,000    395,000 
Accrued interest   27,404    14,942 
Total Current Liabilities   495,804    411,022 
           
Long Term Liabilities          
Convertible notes payable   7,500     
           
Total Liabilities   503,304    411,022 
           
Stockholders' Equity          
Class A super voting preferred stock, $0.0001 par value; 10,000,000 shares authorized, issued and outstanding      1,000       1,000  
Class B non-voting preferred stock, $0.0001 par value; 50,000,000 shares authorized; 0 and 0 issued and outstanding as of September 30, 2016 and December 31, 2015                
Common Stock, $0.0001 par value: 500,000,000 shares authorized, 40,000,000 and 25,118,273 issued and outstanding as of September 30, 2016 and December 31, 2015     2,512       2,512  
Additional paid-in-capital   801    801 
Accumulated earnings   (499,746)   (398,222)
Total Stockholders' Equity   (495,433)   (393,909)
           
Total Liabilities and Stockholders' Equity  $7,871   $17,113 

 

See accompanying notes to financial statements.

 

 

 32 

 

 

 

Safe Lane Systems, Inc.

Statement of Operations

For the Three and Nine Months Ended September 30, 2016 and 2015 (Unaudited)

   

  Three Months
Ended September 30
   Nine Months
Ended September 30
 
   2016   2015   2016   2015 
   Restated       Restated     
Ordinary Income/Expense                  
                     
Revenue  $   $   $   $1,725 
Total Revenue               1,725 
                     
Expense                    
General & administrative expense   2,868    11,012    3,669    16,033 
Impairment expense           1,562     
Professional & contract expense   20,400    56,755    83,710    172,486 
Total Expense   23,268    67,767    89,062    188,519 
                     
Net Income/(Loss) from Operations   (23,268)   (67,767)   (89,062)   (186,794)
                     
Other Income/Expense                    
Interest income                
Amortization expense                
Interest expense   4,184    3,509    12,462    8,196 
Total Other Income/Expense   4,184    3,509    12,462    8,196 
                     
Net Income/(Loss)  $(27,452)  $(71,276)  $(101,524)  $(194,990)
                     
Net Income/(Loss) per share (basic and diluted)  $(0.00)  $(0.00)  $(0.00)  $(0.01)
                     
Weighted average number of common shares outstanding   24,768,273    24,768,273    24,768,273    24,768,273 

 

 

See accompanying notes to financial statements.

 

 

 33 

 

 

Safe Lane Systems, Inc.

Statement of Cash Flow

For the Nine Months Ended September 30, 2016 and 2015 (Unaudited)

   

  Nine Months Ended 
   2016   2015 
   Restated     
Cash Flows From Operating Activities          
Net Income  $(101,524)  $(194,989)
           
Adjustments to reconcile net income to net cash provided by (used for) operating activities:          
Amortization   148    104 
Impairment of intangible asset   1,562     
Stock Based Compensation        
           
Changes in operating Assets and Liabilities:          
Accounts payable   41,012     
Accrued expense   11,308     
Accrued interest expense   12,462    8,196 
           
Net Cash Provided by (used for) Operating Activities   (34,911)   (186,689)
           
Cash Flows from Investing Activities:        
           
Cash Flow from Financing Activities:          
Superior Traffic Controls Loan   20,000    150,000 
Short Term Loan   7,500     
Net cash provided by Financing Activities   27,500    150,000 
           
Net Increase (Decrease) in Cash   (7,411)   (36,689)
Cash at Beginning of Period   15,282    88,495 
Cash at End of Period  $7,871   $51,806 

 

 

See accompanying notes to financial statements.

 

 34 

 

 

SAFE LANES SYSTEMS, INC.

 

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2016

 

 

NOTE 1.  ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

 

SAFE LANES SYSTEMS, INC. (the “Company”), was incorporated in the State of Colorado on September 10, 2013. The Company was formed to engage in the sale of traffic safety equipment. The Company may also engage in any other business permitted by law, as designated by the Board of Directors of the Company. During the second quarter of 2014 the Company secured a perpetual license to all of the intellectual property of Superior Traffic Control in exchange for the issuance of nonvoting convertible stock in the company. In the second quarter of 2016 the Company determined that license and related intellectual property should be written off as worthless due to problems with the engineering provided and the inability to obtain meaningful sales. The Company was redomiciled to become a Delaware Holding Corporation in September of 2016 and is currently pursuing new business opportunities.

 

Basis of Presentation - The accompanying financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position and cash flows. All such adjustments are of a normal, recurring nature.

 

Reclassifications - Certain amounts in the prior period’s financial statements have been reclassified to conform to the current quarter’s presentation and to correct prior period errors.

 

Cash and Cash Equivalents

 

Cash Flows - During the period ending September 30, 2016, the Company primarily utilized cash proceeds from an unsecured short term loan and proceeds from a convertible note payable to fund its operations.

 

Cash flows used by operations for the period ended September 30, 2016 and 2015 were $34,911 and $186,689 respectively.

 

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. As of September 30, 2016, the Company had cash and cash equivalents of $7,871 as compared to cash and cash equivalents of $15,282 as of December 31, 2015.

 

Impairment of Long-life Assets

 

In accordance with ASC Topic 360, the Company reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. No impairment was deemed necessary as of September 30, 2016 and December 31, 2015.

 

Intangible Assets, Patents

 

During the second quarter of 2014 fiscal year the Company acquired the exclusive license rights and intellectual property for the patent of the Kone General device which expires July 2022. As payment for the license rights the company agreed to issue 22,768,273 shares of class B preferred, nonvoting shares to the shareholders of the original license holders “Superior Traffic Controls”. The Company accounts for its patent sub-license in accordance with ASC 350-30-30 “Intangibles – goodwill and other” and 805-50-30 and 805-50-15 related to “Business Combinations” by recognizing the fair value to the amount paid by the company for the asset at the time of purchase. Since Safe Lanes Systems has a limited operating history management determined to use par value as the value recognized for the transaction. Since the patent has a predetermined, finite life span, the cost of the asset will be recognized on a straight line basis over the remaining life of the patent.

 

At the conclusion of each reporting period the patent is evaluated for impairment. As of September 30, 2016 due to the lack of sales and determining that incomplete engineering plans were provided the Company determined it should impair the entire remaining value of the intangible asset and at that time the remaining value was of $1,562 was written off to impairment expense.

  

 

 

 35 

 

 

 

   September 30,
2016
   December 31,
2015
 
Patents  $2,277   $2,277 
Less:  Accumulated Amortization   (595)   (446)
Impairment   (1,682)    
   $   $1,831 

 

Amortization expense for the NINE-month period ended September 30, 2016 and 2015 was $149 and $29 respectively.

 

Accounts payable and accrued liabilities

 

Accounts payable consisted of $42,092 at September 30, 2016 and $1,080 at December 31, 2015 respectively. Accrued expense consisted of $11,308 at September 30, 2016 and $0 at December 31, 2015 respectively. Accrued interest consisted of $27,404 at September 30, 2016 and $14,942 at December 31, 2015 respectively.

 

Unsecured, short-term notes payable

 

The company obtained an unsecured, short-term note of $250,000 at 4% from the original holder of the license to the Kone-General patent in the second quarter of 2014. As of September 30, 2016 the Company had received funding of $250,000 on the note payable and an additional $165,000 under the same terms with a verbal agreement in place and had recognized $27,404 in accrued interest expense.

 

Convertible, long-term notes payable

 

The company obtained five unsecured, long-term notes totaling $7,500 in the third quarter of 2016. The notes do not bear interest until December 31, 2016, after which they will bear interest at 12% per year. The notes are due and payable December 31, 2017 but can be converted into the company’s common stock at the holders request at any time before they are due. Each note will convert into approximately 4% of the companies then outstanding common stock.

 

Stockholders’ Equity

 

At March 31, 2016 and December 31, 2015, the Company was authorized to issue 500,000,000 shares of common stock, $0.0001 par value per share. In addition, 10,000,000 shares of Class A preferred super majority voting stock, $.0001 par value and 50,000,000 shares of Class B preferred, $.0001 par value nonvoting convertible shares were authorized. All common stock shares have full dividend rights. However, it is not anticipated that the Company will be declaring distributions in the foreseeable future.

 

Upon formation, the Company sold the founder 2,000,000 shares of $0.0001 par value common stock for $1,000 cash. Also upon formation, the Company paid the founder stock based compensation for services rendered of 10,000,000 shares of $0.0001 par value class A preferred super majority voting stock. These preferred shares have a stated value of par value of $0.0001. The holder of the Class Stock shall have the right to vote on any matter with holders of Common Stock and may vote as required on any action, which Colorado law provides may or must be approved by vote or consent of the holders of the specific series of voting preferred shares and the holders of common shares. The Record Holders of the Class B Preferred Shares shall have that number of votes equal to that number of common shares which is not less than 60% of the vote required to approve any action, which Colorado law provides may or must be approved by vote or consent of the holders of other series of voting preferred shares and the holders of common shares or the holders of other securities entitled to vote, if any

 

Upon execution of a patent sublicense agreement the Company issued 22,768,273 shares of its class B preferred convertible stock to a trustee on behalf of shareholders of the original license agreement. These shares were converted into regular common stock upon the company registering the underlying shares with the SEC and distribution to stockholders which occurred in the 2015 fiscal year.

 

In the last quarter of 2015 the Company issued 350,000 shares of stock to two contractors for past work. As the Company has issued no stock for cash the Company valued the compensation based upon par value of $.0001 per share resulting in a compensation expense of $35 per share in the period the stock was issued.

 

 

 

 36 

 

 

Professional and contractor expenses

 

Professional and contractor expenses are comprised of the following in the nine-month period ended September 30, 2016:

 

   September 30,
2016
   September 30,
2015
 
Contract Management Fees  $48,600   $48,600 
Other Professional Services   35,110    123,886 
   $83,710   $172,486 

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Stock Based Compensation

 

The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model.

 

Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when options are given for previous service without further recourse. The Company issued stock options to contractors that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of compensation for services already rendered with no recourse.

 

The following table summarizes  share-based compensation expense recorded in selling, general and administrative expenses during each period presented:

 

   September 30,
2016
   December 31,
2015
 
Stock award       350,000 
Total Share-Based Compensation Expense  $   $35 

  

In the last quarter of 2015 the Company issued 350,000 shares of stock to two contractors for past work. As the Company has issued no stock for cash the Company valued the compensation based upon par value of $.001 per share resulting in a compensation expense of $35 per share in the period the stock was issued.

 

Stock option activity was as follows:

 

    Number of
Shares
    Weighted Average
Exercise Price ($)
 
             
Balance at December 31, 2014     10,000,000       0.20  
Granted     0        
Exercised     0        
Forfeited or expired     0        
Balance at December 31, 2015     10,000,000       0.20  
Granted     0        
Exercised     0        
Forfeited or expired     0        
Balance at September 30, 2016     10,000,000       0.20  

 

 

 

 37 

 

 

The following table presents information regarding options outstanding and exercisable as of September 30, 2016:

 

Weighted average contractual remaining term - options outstanding     0.0 years  
Aggregate intrinsic value - options outstanding      
Warrants exercisable     10,000,000  
Weighted average exercise price - options exercisable   $ 0.20  

 

The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows:

 

Risk-free interest rate 0.01%
Expected life of options  4-5 years 
Annualized volatility 144.00%
Dividend Income 0.00%

 

Income Tax

 

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 (“SFAS 109”).  Under SFAS 109 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Fiscal year

 

The Company employs a fiscal year ending December 31.

 

Net Income (Loss) per share

 

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.

 

Revenue Recognition

 

The Company is currently in the Development stage and has very limited revenues. Revenue will be recognized on an accrual basis as earned once operations commence.

 

Financial Instruments

 

The carrying value of the Company’s financial instruments, including cash and cash equivalents, as reported in the accompanying balance sheet, are stated at fair value.

 

Going Concern and Managements’ Plans

 

As shown in the accompanying financial statements for the period ended September 30, 2016, the Company has a limited operating history.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, however, the above conditions raise substantial doubt about the Company’s ability to do so.  The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

 

The Company has a plan in place to remove this threat through the issuance of notes payable and common stocks offerings. If the Offering raises at least $250,000, then the Company’s estimated expenses related to the Offering and the expenses related to initial projected operating costs of the Company will be covered. However, the Company will need to generate more than the expenses of the Offering in order to have enough capital to execute its business plan.

 

 

 

 

 38 

 

 

Recent Accounting Pronouncements

 

The Company has reviewed all recently issued but not yet effective accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or results of operations.

 

Related Party Transactions

 

The Company pays its Chief Executive Officer, Paul Dickman through Mr. Dickman’s consulting company, Breakwater Finance, LLC. For the nine-month period ended September 30, 2016 and June 30, 2015, management fees were $48,600 and $48,600 respectively.

 

Subsequent Events

 

The Company evaluates events and transactions after the balance sheet date but before the financial statements are issued. As of the date of this filing there were no events that materially impacted the company.

 

 

 

 39 

 

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Not Applicable.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

We maintain a system of disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a–15(e) and 15d–15(e)) that is designed to provide reasonable assurance that information that is required to be disclosed is accumulated and communicated to management timely.

 

As required by SEC Rule 15d-15(b), our Chief Executive Officer and our Chief Financial Officer carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report.

 

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective in timely alerting them to material information required to be disclosed in the our periodic filings with the SEC. The determination the disclosure controls and procedures are note effective, was based upon the factors disclosed below that have lead management to determine that its internal control over financial reporting are not effective.

 

Management’s Annual Report On Internal Control Over Financial Reporting

 

Our management, including the Chief Executive Officer and Chief Financial Officer is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

    Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
    Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
    Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. Based on this assessment, management believes that as of December 31, 2017, our internal control over financial reporting is not effective based on those criteria.

 

Specifically, management’s evaluation identified the following material weaknesses, which existed as of December 31, 2017:

 

(1)Financial Reporting Systems: We did not maintain a fully integrated financial consolidation and reporting system throughout the period and as a result, extensive manual analysis, reconciliation and adjustments were required in order to produce financial statements for external reporting purposes.

 

(2)Segregation of Duties: We do not currently have a sufficient complement of technical accounting and external reporting personal commensurate to support standalone external financial reporting under public company or SEC requirements. Specifically, the Company did not effectively segregate certain accounting duties due to the small size of its accounting staff, and maintain a sufficient number of adequately trained personnel necessary to anticipate and identify risks critical to financial reporting and the closing process. In addition, there were inadequate reviews and approvals by the Company’s personnel of certain reconciliations and other processes in day-to-day operations due to the lack of a full complement of accounting staff.

 

 

 

 40 

 

 

We believe that our weaknesses in internal control over financial reporting and our disclosure controls relate in part to the fact that we are a small reporting business with limited personnel. Management and the Board of Directors believe that the Company would need to allocate additional human and financial resources to address these matters, which at this time the Company does not have the financial capability to remediate. Management can give no assurances that it will ever be able to remediate such material weaknesses.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC to provide only management’s report in this annual report.

 

Changes in Internal Control Over Financial Reporting

 

During our most recent fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

 

 

 

 41 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

DIRECTORS AND EXECUTIVE OFFICERS

 

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

 

Name Age Position Term
       
Paul D. Dickman 37 Chief Executive Officer, President, Chief Financial Officer, Director and Chairman Annual

 

Our officers are elected by the board of directors at the first meeting after each annual meeting of our stockholders and hold office until their successors are duly elected and qualified under our bylaws.

 

The directors named above will serve until the next annual meeting of our stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders' meeting. Officers will hold their positions at the pleasure of the board of directors absent any employment agreement. There is no arrangement or understanding between our directors and officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer.

 

BIOGRAPHICAL INFORMATION

 

PAUL D. DICKMAN, CHIEF EXECUTIVE OFFICER, PRESIDENT, CHIEF FINANCIAL OFFICER DIRECTOR AND CHAIRMAN OF THE BOARD SINCE INCEPTION (SEPTEMBER 10, 2013)

 

Paul D. Dickman, age 37, started his career in retail sales and then developed his expertise in the accounting profession through his work as an auditor and consultant with several large, regional public accounting firms. He started his career with Cherry Bekaert & Holland in Greenville, SC, where he was employee from 2003 to 2005. He then worked for Hein and Associates, LLP from 2005 through 2008. From 2008 to 2010 he worked for the commercial real estate investment firm, Northstar Commercial Partners, LLC as a property/project manager. Mr. Dickman, started his own professional service firm in 2010 with a focus on assisting small private companies raise capital and manage the transition from being privately owned to publicly owned and traded.

 

Paul Dickman graduated with a Bachelor of Science degree in Financial Management from Bob Jones University before completing his CPA certification in 2005 in South Carolina. In addition to studying finance and accounting, he received a minor in Communications and was highly involved in scholastic debate throughout his educational years. 

 

Mr. Dickman has served as the Chief Financial Officer for the publicly traded company Chineseinvestors.com, Inc. from 2009 through 2014, during which time they raised over $10,000,000 in equity investment. He re-assumed the position in 2017 and has held it through the present.

 

CONFLICTS OF INTEREST – GENERAL.

 

Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts and corporation opportunity, involved in participation with such other business entities. While the officers and directors of our business are engaged full time in our business activities, the amount of time they devote to other business may be up to approximately 30 hours per week.

 

 

 

 42 

 

 

CONFLICTS OF INTEREST – CORPORATE OPPORTUNITIES

 

Certain of our officers and directors may be directors and/or principal stockholders of other companies and, therefore, could face conflicts of interest with respect to potential acquisitions. In addition, our officers and directors may in the future participate in business ventures, which could be deemed to compete directly with us. Additional conflicts of interest and non-arms length transactions may also arise in the future in the event our officers or directors are involved in the management of any firm with which we transact business. Our Board of Directors has adopted a policy that we will not seek a merger with, or acquisition of, any entity in which management serve as officers or directors, or in which they or their family members own or hold a controlling ownership interest. Although the Board of Directors could elect to change this policy, the Board of Directors has no present intention to do so. In addition, if we and other companies with which our officers and directors are affiliated both desire to take advantage of a potential business opportunity, then the Board of Directors has agreed that said opportunity should be available to each such company in the order in which such companies registered or became current in the filing of annual reports under the Exchange Act subsequent to January 1, 2013.

 

Our officers and directors may actively negotiate or otherwise consent to the purchase of a portion of their common stock as a condition to, or in connection with, a proposed merger or acquisition transaction. It is anticipated that a substantial premium over the initial cost of such shares may be paid by the purchaser in conjunction with any sale of shares by our officers and directors which is made as a condition to, or in connection with, a proposed merger or acquisition transaction. The fact that a substantial premium may be paid to our officers and directors to acquire their shares creates a potential conflict of interest for them in satisfying their fiduciary duties to us and our other stockholders. Even though such a sale could result in a substantial profit to them, they would be legally required to make the decision based upon the best interests of us and our other stockholders, rather than their own personal pecuniary benefit.

 

CODE OF ETHICS

 

Due to the limited scope of our current operations, we have not adopted a corporate code of ethics that applies to our principal executive officer, principal accounting officer, or persons performing similar function.

 

ITEM 11. EXECUTIVE COMPENSATION

 

The following table sets forth certain information concerning compensation paid by the Company to its sole officer for the fiscal years ended December 31, 2016, 2014 and 2013 (the "Named Executive Officers"):

 

SUMMARY EXECUTIVES COMPENSATION TABLE

In Dollars

 

Name & Position  Year 

Contract Payments

($)

 

Bonus

($)

 

Stock awards

($)

 

Option awards

($)

 

Non-equity incentive plan compensation

($)

 

Non-qualified deferred compensation earnings

($)

 

All other compensation

($)

 

Total

($)

 
                             
Paul D. Dickman, CEO, President, Chairman (1)(2)  2017                $ 
   2016  20,000              $20,000 
  2015  60,000    35          $60,035 

 

(1) Safe Lane Systems, Inc., the original reporting entity, was incorporated on September 10, 2013. As Founder, Mr. Dickman received 10,000,000 shares of Class “A” Preferred Super Majority Voting shares at par value of $0.0001 par value.

 

(2) The $1,000 stock award to Mr. Dickman of 10,000,000 shares of Class "A" Preferred Super Majority Voting shares were calculated based upon the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 per disclosure on the 12/31/13 audited financial statements, notes to the financial statements, "Statement of Stockholders' Equity (Deficit).  These Class “A” Preferred shares represent no underlying ownership of the Company itself, and are solely a voting interest in the Company, bear no dividends, and have no market value as none of our shares, preferred or common are traded in any venue, therefore they were valued based upon the stated value within the certificate of designation approved by our Company board.

 

 

 

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EMPLOYMENT AND CONSULTING AGREEMENTS

 

We have employment/consultant agreements as of April 9, 2015, with our key officers, as listed below. Described below are the compensation packages our Board approved for our executive officers. The compensation agreements were approved by our board based upon recommendations conducted by the board.

 

           Stock Warrants
Name  Position   Annual Compensation   Vested  Unvested
               
Paul D. Dickman  CEO, President, Director and Chairman  $–  (1)  0  0

 

Employment Contracts and Termination of Employment and Change-in-Control Arrangements

 

There are employment contracts, compensatory plans or arrangements, including payments to be received from us, with respect to any of our directors or executive officers which would in any way result in payments to any such person because of his or her resignation, retirement or other termination of employment with us. These agreements do not provide for payments to be made as a result of any change in control of us, or a change in the person's responsibilities following such a change in control.

 

DIRECTOR COMPENSATION

 

All of the Company’s officers and/or directors will continue to be active in other companies. All officers and directors have retained the right to conduct their own independent business interests.

 

The Company does not pay any Directors fees for meeting attendance.

 

The following table sets forth certain information concerning compensation paid to the Company’s directors during the years ended December 31, 2017 and 2016:

 

Name Year  

Fees earned or paid in cash

($)

Stock awards

($)

Option awards ($) Non-equity incentive plan compensation ($)

Non-qualified deferred compensation earnings

($)

All other compensation ($)

Total

($)

                 
Paul D. Dickman 2017 $-0- $-0- $-0- $-0- $-0- $-0- $-0-
  2016 $-0- $-0- $-0- $-0- $-0- $-0- $-0-

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

 

The following table sets forth certain information concerning outstanding equity awards held by the Chief Executive Officer, Chief Financial and the Company’s most highly compensated executive officers for the fiscal year ended December 31, 2016 (the "Named Executive Officers"):

 

  Option Awards Stock awards
Name Number of securities underlying unexercised warrants (#) exercisable Number of securities underlying unexercised warrants (#) unexercisable

Equity incentive plan awards: Number of securities underlying unexercised unearned warrants

(#)

Option exercise price

($)

Option expiration date

Number of shares or units of stock that have not vested

(#)

Market value of shares of units of stock that have not vested

($)

Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)

Equity incentive plan awards: Market or payout value of unearned shares, units or others rights that have not vested

($)

Paul D. Dickman, CEO, President and Chairman 0 0 0 0 0 0 0 0 0

 

 

 

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

 

The following tables set forth certain information regarding beneficial ownership of our common stock, as of December 31, 2016, by:

 

·each person who is known by Southeastern Holdings, Inc. to own beneficially more than 5% of the Company's outstanding common stock,
·each of the Company's named executive officers and directors, and
·all executive officers and directors as a group.

 

Shares of common stock not outstanding but deemed beneficially owned by virtue of the right of an individual to acquire the shares of common stock within 60 days are treated as outstanding only when determining the amount and percentage of common stock owned by such individual. Except as noted below the table, each person has sole voting and investment power with respect to the shares of common stock shown.

 

OFFICERS AND DIRECTORS

 

Title of Class Name of Beneficial Owner (1) Amount and Nature of Beneficial Owner Percent of Class (2)
       
Common shares Paul D. Dickman, CEO, President, Director and Chairman 24,768,273 62%
       
       
Common shares All Directors and Executive Officers as a Group (2 persons) 24,768,273 62%

 

(1)The address of each person listed above, unless otherwise indicated, is c/o Southeastern Holdings, Inc., 19 Old Town Square, Suite #238, Fort Collins, CO 80524.
(2)Based upon 40,000,000 shares issued and outstanding on a fully diluted basis and conversion of the Class “B” Preferred Convertible Non-Voting Stock.

 

 

GREATER THAN 5% STOCKHOLDERS

 

Title of Class Name of Beneficial Owner Amount and Nature of Beneficial Owner Percent of Class (1)
Common shares Paul D. Dickman, CEO, President and Chairman (2) 24,768,273 62%
       
(1)Based upon 40,000,000 shares issued and outstanding on a fully diluted basis.

 

Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination of beneficial ownership of securities. That rule provides that a beneficial owner of a security includes any person who directly or indirectly has or shares voting power and/or investment power with respect to such security. Rule 13d-3 also provides that a beneficial owner of a security includes any person who has the right to acquire beneficial ownership of such security within sixty days, including through the exercise of any option, warrant or conversion of a security. Any securities not outstanding which are subject to such warrants or conversion privileges are deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person. Those securities are not deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person.

 

No shareholders meetings were held in the last fiscal year..

 

 

 

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Other than the stock transactions discussed above, we have not entered into any transaction nor are there any proposed transactions in which any founder, director, executive officer, significant shareholder of our Company or any member of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.

 

No person who may, in the future, be considered a promoter of this offering, will receive or expect to receive assets, services or other considerations from us except those persons who are our salaried employees or directors. No assets will be, nor expected to be, acquired from any promoter on behalf of us. We have not entered into any agreements that require disclosure to the shareholders.

 

We have employment agreements as of April 9, 2015, with our key officers, as listed below. Described below are the compensation packages our Board approved for our executive officers. The compensation agreements were approved by our board based upon recommendations conducted by the board.

 

            Stock Warrants
Name   Position   Annual Compensation   Vested   Unvested
                 
Paul D. Dickman   CEO, President and Chairman   $60,000 (1)   0   0

 

(1) Mr. Dickman is also entitled to an administrative fee of 8% of total billings.

 

Director Independence

 

Our board of directors undertook its annual review of the independence of the directors and considered whether any director had a material relationship with us or our management that could compromise his ability to exercise independent judgment in carrying out his responsibilities. As a result of this review, the board of directors affirmatively determined that Travis Hair is “independent” as such term is used under the rules and regulations of the Securities and Exchange Commission. Daniel Allen, as Chief Executive Officer of the Company, is not considered to be “independent.”

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

GENERAL. BF BORGERS, CPA, PC (“BF BORGERS”) is the Company's independent registered public accounting firm. The Company's Board of Directors has considered whether the provisions of audit services are compatible with maintaining BF BORGER’s independence. The engagement of our independent registered public accounting firm was approved by our board of directors functioning as our audit committee prior to the start of the audit of our consolidated financial statements for the year ended December 31, 2017.

 

 

The following table represents aggregate fees billed to the Company for the years ended December 31, 2017 and 2016.

 

   Year Ended December 31, 
   2017   2016 
Audit Fees  $12,500   $12,500 
           
Audit-related Fees        
           
Tax Fees  $1,000   $1,000 
           
All Other Fees  $0   $0 
Total Fees  $13,500   $13,500 

 

All audit work was performed by the auditor’s full time employees.

 

 

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PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS

 

The following is a complete list of exhibits filed as part of this Form 10-K. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

 

EXHIBIT

NUMBER

 

 

 

DESCRIPTION

 
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1   Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
32.2   Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
101.INS*   XBRL Instance Document (1)
101.SCH*   XBRL Taxonomy Extension Schema Document (1)
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB*   XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document (1)
     
(1)   Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 

* To be filed by amendment.

 

 

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  SOUTHEASTERN HOLDINGS, INC.
   
Date: August 15, 2018  
   
  By: /s/ Paul Dickman
  Paul Dickman, President,
  Chief Executive Officer (Principal Executive Officer and
  Chief Financial Officer  (Principal Accounting Officer)

 

In accordance with the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Dated: August 15, 2018 SOUTHEASTERN HOLDINGS, INC.
   
   
  /s/ Paul Dickman
  Paul Dickman, Director

 

 

 

 

 

 

 

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