UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the Quarterly Period Ended March 31, 2017 |
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from_________ to _______ |
Commission File Number: 000-55401
WOODLAND HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware |
| 80-0379897 |
(State of incorporation) |
| (I.R.S. Employer Identification No.) |
835 Innovation Drive, Suite 200
Knoxville, TN 37932
(Address of principal executive offices)
(865) 777-2740
(Registrants telephone number including area code)
Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 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 _X___
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer ____ Accelerated filer ____ Non-accelerated filer ____ Smaller reporting company X
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ____ No X
The number of shares outstanding of the registrants common stock, $0.001 par value per share, as of May 15, 2017 was 70,096,470.
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| PART I. FINANCIAL INFORMATION |
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1 | Financial Statements (Unaudited): |
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| Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 (Audited) | 1 |
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| Condensed Consolidated Statements of Operations for the Three-Month Periods Ended March 31, 2017 and 2016 | 2 |
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| Condensed Consolidated Statement of Stockholders Equity for the Three-Month Period Ended March 31, 2017 | 3 |
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| Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2017 and 2016 | 4 |
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| Notes to Condensed Consolidated Financial Statements | 5 |
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2 | Managements Discussion and Analysis of Financial Condition and Results of Operations | 10 |
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3 | Quantitative and Qualitative Disclosures about Market Risk | 12 |
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4 | Controls and Procedures | 12 |
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| PART II. OTHER INFORMATION |
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1 | Legal Proceedings | 13 |
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1A | Risk Factors | 13 |
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2 | Unregistered Sales of Equity Securities and Use of Proceeds | 13 |
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3 | Defaults Upon Senior Securities | 13 |
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4 | Mine Safety Disclosures | 13 |
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5 | Other Information | 13 |
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6 | Exhibits | 13 |
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| Signatures | 14 |
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Woodland Holdings Corporation
Condensed Consolidated Balance Sheets
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| March 31, 2017 |
| December 31, 2016 |
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Assets |
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Current assets: |
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Cash |
| $ | |
| $ | 164 |
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Assets of discontinued operations |
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| 8,769 |
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TOTAL ASSETS |
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| $ | 8,933 |
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Liabilities and Stockholders Equity (Deficit) |
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Current liabilities: |
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Liabilities of discontinued operations |
| $ | |
| $ | 33,932 |
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Total liabilities |
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| 33,932 |
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Commitments and Contingencies |
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Stockholders equity (deficit): |
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Common stock, $0.01 par value, 100,000,000 shares authorized; |
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| 46,552 |
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| 46,552 |
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Additional paid-in capital |
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| (12,099,867 | ) |
| (12,130,228 | ) |
Retained earnings |
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| 12,053,315 |
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| 12,058,677 |
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Total stockholders equity (deficit) |
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| (24,999 | ) |
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
| $ | |
| $ | 8,933 |
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See Notes to Condensed Consolidated Financial Statements.
- 1 -
Woodland Holdings Corporation
Condensed Consolidated Statements of Operations
(unaudited)
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Sales, net |
| $ | |
| $ | |
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Costs of goods sold |
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Gross profit |
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Expenses: |
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Selling, general and administrative expenses |
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| 164 |
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Total Operating Expenses |
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| 164 |
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Operating income (loss) |
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| (164 | ) |
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Other income (expense), net: |
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Other income (expense), net |
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Total other expense, net |
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Income (loss) from continuing operations before income taxes |
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| (164 | ) |
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Income taxes |
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Income (loss) from continuing operations |
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| (164 | ) |
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Income (loss) from discontinued operations, net of tax |
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| (5,198 | ) |
| (20,079 | ) |
Gain from discontinued operations, net of tax |
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Net income (loss) |
| $ | (5,362 | ) | $ | (20,079 | ) |
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Basic and diluted earnings loss per share from continuing operations |
| $ | 0.00 |
| $ | 0.00 |
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Basic and diluted earnings per share from discontinued operations |
| $ | 0.00 |
| $ | 0.00 |
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Basic and diluted earnings (loss) per share |
| $ | 0.00 |
| $ | 0.00 |
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Basic and diluted weighted average number shares outstanding |
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| 4,655,338 |
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| 4,655,338 |
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See Notes to Condensed Consolidated Financial Statements.
- 2 -
Woodland Holdings Corporation
Condensed Consolidated Statements of Stockholders Equity
(unaudited)
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| Additional |
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| Total |
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| Paid-in |
| Accumulated |
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| Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) |
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Balance, December 31, 2016 |
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| 4,655,338 |
| $ | 46,552 |
| $ | (12,130,228 | ) | $ | 12,058,677 |
| $ | (24,999 | ) | |
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Equity of disposed subsidiaries |
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| 30,361 |
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| 30,361 |
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Net income |
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| (5,362 | ) |
| (5,362 | ) | |
Balance, March 31, 2017 |
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| 4,655,338 |
| $ | 46,552 |
| $ | (12,099,867 | ) | $ | 12,053,315 |
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See Notes to Condensed Consolidated Financial Statements.
- 3 -
Woodland Holdings Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited)
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| For the Three Months |
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Cash Flows from Operating Activities |
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Net loss |
| $ | (5,362 | ) | $ | (20,079 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities |
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Depreciation |
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Changes in operating assets and liabilities, net of acquisitions and divestitures: |
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Changes in assets and liabilities of discontinued operations |
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| (25,163 | ) |
| 20,079 |
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Net cash used in operating activities |
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| (30,525 | ) |
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Cash Flows from Investing Activities |
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Disposal of subsidiaries |
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| 30,361 |
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Net cash used in investing activities |
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| 30,361 |
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Net change in cash |
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| (164 | ) |
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Cash at beginning of period |
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| 164 |
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| 164 |
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Cash at end of period |
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| $ | 164 |
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Cash paid for: |
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Interest |
| $ | |
| $ | |
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Income taxes |
| $ | |
| $ | |
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See Notes to Condensed Consolidated Financial Statements.
- 4 -
Woodland Holdings Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2017
1. Basis of Presentation
Interim Unaudited Condensed Consolidated Financial Statements
The unaudited interim condensed consolidated financial statements of Woodland Holdings Corporation (the Company, Woodland, we, our or us) as of March 31, 2017 and for the three-month periods ended March 31, 2017 and 2016 contained in this Quarterly Report (collectively, the Unaudited Interim Condensed Consolidated Financial Statements) were prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for all periods presented. The results of operations for the three-month period ended March 31, 2017 is not necessarily indicative of the results that may be expected for the entire fiscal year.
The accompanying Unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with the regulations for interim financial information of the Securities and Exchange Commission (the SEC). Accordingly, they do not include all of the disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited accompanying statements of financial condition and related interim statements of operations, cash flows, and stockholders deficit include all adjustments (which consist only of normal and recurring adjustments) considered necessary for a fair presentation in conformity with U.S. GAAP. These Unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with the Woodland Holdings consolidated financial statements as of and for the year ended December 31, 2016, as filed with the SEC on Form 10-K.
Organization
The Company was incorporated in the State of Delaware, on January 21, 2009.
The Company is a holding company which recently disposed of its three telecommunications services subsidiaries. The Companys subsidiaries, as explained in more detail below, seek to take advantage of opportunities created from the increased accessibility of content across mobile, television and internet platforms.
Spinoff
The Company was originally a wholly owned subsidiary of CornerWorld Corporation (CWC), a Nevada corporation publicly traded on the OTCQB exchange. On August 13, 2015, CWCs Board of Directors formally approved a plan whereby Woodland and its wholly owned subsidiaries were to be spun off in their entirety. On October 14, 2015, the US Securities and Exchange Commission (the SEC) formally informed Woodland that its registration statement had become effective, clearing the way for the spin-off. Finally, on December 31, 2015, CWCs Board of Directors spun-off Woodland to CWCs shareholders of record as of December 31, 2015 (the Record Date). On January 1, 2016, CWC shareholders, as of the Record Date, received shares in Woodland equal to their pro-rata ownership percentage of CWC. For every share owned by CWCs shareholders as of the Record Date, those same shareholders were issued 1 share of Woodlands common stock. Woodland is in the process of taking the necessary actions whereby Woodlands shares will be free-trading on the OTCQB exchange.
Operations
The Company previously provided telephony and internet services through its wholly owned subsidiaries Phone Services and More, L.L.C., doing business as Visitatel (PSM) and T2 Communications, L.L.C. (T2). As a provider of Internet and voice over Internet protocol (VoIP) services, T2 delivered traditional telecommunications services via VoIP to business customers in Texas. T2 is a Competitive Local Exchange Carrier (CLEC) that generated revenues via commissions from its carrier partners related to the provision of long-distance minutes to its customers. PSM, also a CLEC, generated revenues via earning commissions from serving as a broker for services provided by T2. On September 29, 2016, T2s only customer informed T2 that it would not be renewing its contract with T2 and the contract expired of its own accord on September 30, 2016. Absent this customer T2 had no other current sources of revenues and, as a result, PSM had no source of commissions.
TinyDial, LLC (TinyDial) had no accounts, no operations and no customers but holds a telecommunications patent. It was a development stage company whose core focus was enabling its users to conduct unlimited free conference calls, direct dialing via the use of short codes, instant messaging and contact management, among other mobile telecommunications services.
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Woodland Holdings Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
On March 31, 2017, the Company sold 100% of the outstanding membership interests of the Companys wholly-owned subsidiaries, PSM, T2 and TinyDial (collectively the Subsidiaries) to Enversa Companies, LLC (Enversa), a subsidiary of CWC, for cash consideration of $1.00. At the time of the sale, the Subsidiaries had ceased all operations and had no active customers or employees. Accordingly, the results of the Subsidiaries have been reported as discontinued operations in this quarterly report on Form 10-Q.
Change of Control
On March 31, 2017, Scott N. Beck (the Companys Chief Executive Officer and Chairman), V. Chase McCrea III (the Companys Chief Financial Officer), Marc Blumberg (a member of the Board of Directors), IU Holdings II, GP, Inc., and Opal Capital, LLC, among others, (collectively, the Selling Stockholders) entered into a Stock Purchase Agreement, dated March 31, 2017 (the Agreement), with 4M Industrial Oxidation, LLC, a Tennessee limited liability company (4MIO or the Purchaser), pursuant to which 4MIO purchased from the Selling Stockholders an aggregate of 3,664,641 shares of common stock, par value $0.01 per share (the Common Stock), of the Company, representing approximately 78.7% of the issued and outstanding shares of Common Stock of the Company and substantially all of the shares of Common Stock of the Company held by the Selling Stockholders, in consideration for $100,000, or approximately $0.025 per share (the Transaction). The foregoing sale of Common Stock by the Selling Shareholders resulted in a change in control of the Company.
In conjunction with the Transaction and the disposition of the Subsidiaries, the Company accepted the resignation of Scott N. Beck as the Companys Chairman of the Board and Chief Executive Officer, Marc Blumberg as a Director and V. Chase McCrea III as the Companys Chief Financial Officer, effective immediately.
As part of his resignation, Mr. Beck relinquished his security interest in the Companys assets, pursuant to that certain Promissory Note dated as of March 30, 2011 between CWC and Mr. Beck (the Note). Mr. Beck also released the Company from responsibility for any accrued but unpaid interest and late fees accrued on the Note.
Mr. Blumberg has served the Company as a non-compensated director since his appointment in 2008. Mr. McCrea has not drawn salary or medical benefits from CWC since July 15, 2015. Prior to their respective resignations, Mr. Beck and Mr. Blumberg appointed Joshua M. Kimmel as the Chief Executive Officer, President and Director.
2. Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist in understanding the Companys consolidated financial statements. The consolidated financial statements and notes are representations of the Companys management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles (GAAP) in the United States of America and have been consistently applied in the preparation of the consolidated financial statements. The consolidated financial statements are stated in United States of America dollars.
Receivables
Accounts receivable include uncollateralized customer obligations due under normal trade terms requiring payment within 30-60 days from invoice date. Payments of accounts receivable are allocated to the specific invoices identified on the customers remittance advice or, if unspecified, are applied to the earliest unpaid invoices.
The carrying amount of accounts receivable is reduced by a valuation allowance for doubtful accounts that reflects managements best estimate of the amounts that will not be collected based on historical collection trends. The allowance for doubtful accounts had been completely disposed, along with the associated accounts receivable as of March 31, 2017; the allowance was $25,351 as of December 31, 2016 and had been included as part of assets of discontinued operations as of that date.
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Woodland Holdings Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
Fair Value of Financial Instruments
ASC No. 850 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amount of the Companys cash and cash equivalents, accounts receivable, accounts receivable-related party, accounts payable, accounts payable-related party and accrued liabilities approximate their estimated fair values due to their short-term maturities. Notes payable are carried at their face value net of their issuance costs which management believes is a reasonable approximation for their fair value. Warrants with put features are carried at their minimum cash put value discounted for the time value of money. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, currency or credit risks arising from these consolidated financial statements.
Income Taxes
The Company accounts for income taxes in accordance with ASC No. 740 which requires the use of the asset and liability method of accounting of income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the consolidated financial statements 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 those temporary differences are expected to be recovered or settled.
Basic and Diluted Earnings (Loss) Per Share
In accordance with ASC 260, basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per share, if any, is computed similar to basic earnings (loss) per share except that the denominator is adjusted for the potential dilution that could occur if stock options, warrants, and other convertible securities were exercised or converted into common stock. The Company had no dilutive securities outstanding at any reporting period.
Revenue Recognition
The Company recognizes revenue in accordance with Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as revised by SAB 104. As such, the Company recognizes gross revenue when persuasive evidence of an arrangement exists, the price is fixed or readily determinable and collectability is probable. The Company does not provide sales discounts to its customers. For PSM and T2, the revenue is derived service contracts for the phone and internet services used by each customer or via the carrier access billing derived from customer minutes being processed through T2s outsourced providers. Revenue is recognized as the services are provided.
Use of Estimates
The preparation of the Companys consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an original maturity of three (3) months or less to be cash equivalents.
Long-Lived Assets
The Company accounts for its long-lived assets in accordance with ASC 360. The Companys primary long-lived assets are property and equipment. ASC 360 requires a company to assess the recoverability of its long-lived assets whenever events and circumstances indicate the carrying value of an asset or asset group may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. As previously noted, all of the Companys long-lived assets have become fully depreciated.
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Woodland Holdings Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Woodland Holdings Corporation, its wholly owned subsidiaries and entities determined to meet the definition of Variable Interest Entities. All significant intercompany transactions and balances have been eliminated in consolidation.
Concentrations of Cash and Cash Equivalents
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Federal Deposit Insurance Corporation (FDIC) currently insures accounts at each institution for up to $250,000. At times, cash balances may exceed the FDIC insurance limit of $250,000. At March 31, 2017 and December 31, 2016, the Company had no concentrations that were in excess of that which is insured by the FDIC.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued during the three months ended March 31, 2017, none of which are expected to have a material impact on the Companys consolidated financial position, operations, or cash flows.
Reclassifications
Certain prior year accounts have been reclassified to conform to the current years presentation.
3. Discontinued Operations
As previously noted, we completed the sale of the Subsidiaries on March 31, 2017 for $1.00; we recognized no gain on the sale. The Subsidiaries operations have been reclassified as discontinued operations for its operations for the three months ended March 31, 2017 and 2016. The following is a summary of the operating results of the Subsidiaries discontinued operations.
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Sales, net |
| $ | 1,302 |
| $ | 21,334 |
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Income (loss) from discontinued operations before income taxes |
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| (5,198 | ) |
| (20,079 | ) |
Income taxes |
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Net income from discontinued operations |
| $ | (5,198 | ) | $ | (20,079 | ) |
The following table represents the Subsidiaries discontinued assets and liabilities as of:
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| March 31, 2017 |
| December 31, 2016 |
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Assets, net |
| $ | |
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| 8,769 |
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Liabilities, net |
| $ | |
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| 33,932 |
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- 8 -
Woodland Holdings Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
4. Commitments and Contingencies
Litigation
The Company is occasionally involved in other litigation matters relating to claims arising from the ordinary course of business. The Companys management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on our business, results of operations and financial condition.
5. Related Party Transactions
The Company previously operated at no cost from office space that CWC leased from 13101 Preston Road, LP. Trusts managed by the control party of the Companys previously largest shareholder along with trusts controlled by the family of the Companys former CEO own the building from which the Company operated. The lease expired on January 31, 2016 and CWC paid $0 and $2,500 in rent during the three-month periods ended March 31, 2017 and 2016, respectively.
6. Subsequent Events
Reverse Merger with 4M Industrial Oxidation, LLC
As previously disclosed on a Form 8-K filed with the SEC on April 10, 2017, on April 6, 2017, the Company entered into an Agreement and Plan of Merger, dated April 6, 2017 (the Merger Agreement), with 4MIO Merger Sub, LLC, a Tennessee limited liability company and wholly-owned subsidiary of the Company (the Merger Sub), and 4MIO, for the purposes of consummating a reverse merger (the Merger).
Pursuant to the Merger Agreement, Merger Sub merged with and into 4MIO, with 4MIO being the surviving company and resulting in 4MIO becoming a wholly-owned subsidiary of the Company. The Merger was intended to constitute a tax-free reorganization within the meaning of Section 368 of the United States Internal Revenue Code of 1986, as amended.
In the Merger, the members of 4MIO exchanged their membership interests of 4MIO, representing 100% of the outstanding membership interests of 4MIO, for aggregate of 55 million (55,000,000) shares of common stock, par value $0.01 (the Common Stock), of the Company which represented approximately 78.46% of the shares of Common Stock of the Company based on an aggregate of 70,096,470 shares of Common outstanding upon consummation of the Merger.
Capitalization Changes
On April 12, 2017 (the Record Date), the Board of Directors of the Company and the stockholders holding an aggregate of 50,640,679 outstanding shares of Common Stock, representing approximately 72.24% of all votes entitled to be voted at any annual or special meeting of stockholders of the Company or action by written consent (the Majority Stockholders), approved of the following corporate action (the Corporate Action) by written consent in lieu of a meeting as permitted under the Delaware General Corporation Law and the By-laws of the Company:
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| To file a Certificate of Amendment (the Amendment) to the Certificate of Incorporation of the Company to (i) increase the authorized amount of Common Stock of the Company from 100 Million (100,000,000) shares to 250 Million (250,000,000) shares; (ii) reduce the par value of the Common Stock from $0.01 to $0.0001 per share, and (iii) authorize 25,000 shares of blank check preferred stock, par value $0.0001 per share (Preferred Stock). |
The Company filed a Preliminary Information Statement with the Securities and Exchange Commission on April 12, 2017 (SEC) pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). On April 24, 2017, the Company filed a Definitive Information Statement with the SEC and filed the Amendment with the Secretary of State of Delaware. The Amendment became effective on May 15, 2017
There were no events that took place subsequent to March 31, 2017 up through the date of the filing of these financial statements that had a material impact on these financial statements.
- 9 -
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview
Woodland is a holding company that previously owned telecommunication services subsidiaries providing services for the increased accessibility of content across mobile and Internet platforms. It disposed of all its subsidiaries on March 31, 2017.
Three Months ended March 31, 2017 Highlights:
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| · | On March 31, 2017, the Company sold 100% of the outstanding membership interests of the Companys wholly-owned subsidiaries, PSM, T2 and TinyDial (collectively the Subsidiaries) to Enversa Companies, LLC (Enversa), a subsidiary of CWC, for cash consideration of $1.00. |
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| · | On March 31, 2017, Scott N. Beck (the Companys Chief Executive Officer and Chairman), V. Chase McCrea III (the Companys Chief Financial Officer), Marc Blumberg (a member of the Board of Directors), IU Holdings II, GP, Inc., and Opal Capital, LLC, among others, (collectively, the Selling Stockholders) entered into a Stock Purchase Agreement, dated March 31, 2017 (the Agreement), with 4M Industrial Oxidation, LLC, a Tennessee limited liability company (4MIO or the Purchaser), pursuant to which 4MIO purchased from the Selling Stockholders an aggregate of 3,664,641 shares of common stock, par value $0.01 per share (the Common Stock), of the Company, representing approximately 78.7% of the issued and outstanding shares of Common Stock of the Company and substantially all of the shares of Common Stock of the Company held by the Selling Stockholders, in consideration for $100,000, or approximately $0.025 per share (the Transaction). The foregoing sale of Common Stock by the Selling Shareholders resulted in a change in control of the Company. |
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| · | In conjunction with the Transaction and the disposition of the Subsidiaries, the Company accepted the resignation of Scott N. Beck as the Companys Chairman of the Board and Chief Executive Officer, Marc Blumberg as a Director and V. Chase McCrea III as the Companys Chief Financial Officer, effective immediately. |
| · | As part of his resignation, Mr. Beck relinquished his security interest in the Companys assets, pursuant to that certain Promissory Note dated as of March 30, 2011 between CWC and Mr. Beck (the Note). Mr. Beck also released the Company from responsibility for any accrued but unpaid interest and late fees accrued on the Note leaving the Company completely free from debt or any other encumbrances. |
| · | Prior to their respective resignations, Mr. Beck and Mr. Blumberg appointed Joshua M. Kimmel as the Chief Executive Officer, President and Director.
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Critical Accounting Policies and Estimates
Use of Estimates and Critical Accounting Policies
In preparing our Unaudited Condensed Consolidated Financial Statements, we make estimates, assumptions and judgments that can have a significant effect on our revenues, income (loss) from operations, and net income (loss), as well as on the value of certain assets on our consolidated balance sheet. We believe that there are several accounting policies that are critical to an understanding of our historical and future performance as these policies affect the reported amounts of revenues, expenses and significant estimates and judgments applied by management. While there are a number of accounting policies, methods and estimates affecting our financial statements, areas that are particularly significant include allowance for doubtful accounts, impairment of long-lived assets (including goodwill), revenue recognition and stock-based compensation. In addition, please refer to Note 2 of the Notes to the Unaudited Interim Condensed Consolidated Financial Statements for further discussion of our accounting policies.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on an estimate of buckets of customer accounts receivable, stratified by age, that, historically, have proven to be uncollectible; in addition, in certain cases, the allowance estimate is supplemented by specific identification of larger customer accounts and our best estimate of the likelihood of potential loss, taking into account such factors as the financial condition and payment history of major customers. We evaluate the collectability of our receivables at least quarterly. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The differences could be material and could significantly impact cash flows from operating activities.
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Impairment of Long-Lived Assets
The Companys management assesses the recoverability of its long-lived assets by determining whether the depreciation of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment is measured based on fair value and is charged to operations in the period in which long-lived asset impairment is determined by management.
Income Taxes
The Company accounts for income tax in accordance with ASC No. 740 which requires the use of the asset and liability method of accounting of income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements 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 those temporary differences are expected to be recovered or settled.
Revenue Recognition
It is the Companys policy that revenue from product sales or services will be recognized in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition (SAB No. 104), which superseded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB No. 101). SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on managements judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued during the three-month period ended March 31, 2017, none of which are expected to have a material impact on the Companys consolidated financial position, operations, or cash flows.
Results of Operations
Comparison of the three months ended March 31, 2017 to the three months ended March 31, 2016
Revenues, Cost of Sales and Gross Profit:
We had no Revenues, cost of Sales or Gross Profit in the periods ending March 31, 2017 and 2016 due to the fact that the results of our Subsidiaries have been reclassified as discontinued operations.
Selling, General and Administrative Expenses:
We had Selling, General and Administrative Expenses (SG&A) totaling $164 for the three-month period ended March 31, 2017 as compared no SG&A expenses for the corresponding period during the prior year. This is due to the fact that the results of our Subsidiaries have been reclassified as discontinued operations.
Depreciation Expense:
We had no Depreciation Expense in the periods ending March 31, 2017 and 2016 due to the fact that the results of our Subsidiaries have been reclassified as discontinued operations. Additionally, our Subsidiaries also had no fixed assets as of the end of either reporting period.
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Loss from Discontinued Operations Before Taxes and Net Loss:
Loss from Discontinued Operations totaled $5,198 for the three-month period ended March 31, 2017 as compared to $20,079 for the corresponding period in the prior year. As previously noted, the improvement of $14,881 is primarily due to the fact that in the prior year we incurred significant management fees to CWC, our previous parent, that did not recur in the current year. Accordingly, Net Loss totaled $5,362 for the three-month period ended March 31, 2017 as compared to $20,079 in the corresponding period of the prior year.
Liquidity and Capital Resources
As of March 31, 2017, we had divested all assets and our Subsidiaries in anticipation of the Transaction. We anticipate filing an amended Current Report on Form 8-K to reflect the impact of the Agreement and Plan of Merger, dated April 6, 2017 with 4MIO Merger Sub, LLC, a Tennessee limited liability company and wholly-owned subsidiary of the Company (the Merger Sub), and 4MIO, for the purposes of consummating a reverse merger (the Merger). The financial statements of the Merger Sub will be included in the 8-K to reflect the pro-forma impact of the Merger.
As of March 31, 2017, the Company is debt free and has no financial commitments.
We had no financing activities for the three-month period ended March 31, 2017 and our lone investing activity was comprised of the divestiture of our Subsidiaries.
We have no other bank financing or other external sources of liquidity. There can be no assurance that, going forward, our operations will generate positive operating cash flow.
Off-balance sheet arrangements
We have not entered into any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Exchange Act is accumulated and communicated to the Companys management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
The Companys management, with the participation of its principal executive officer and its chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) or 15d-15(e)) as of March 31, 2017. Based on that evaluation, the Companys chief executive officer and chief financial officer concluded that, as of that date, the Companys disclosure controls and procedures, were not effective at a reasonable assurance level.
Managements Remediation Plan
Management determined that a material weakness existed due to an inability to appropriately segregate duties in the accounting department due to the number of personnel in the accounting department. Management has included additional reviews and controls to mitigate the size of the accounting department and the overlap of responsibilities. Management believes the foregoing efforts will effectively remediate this material weakness but the Company can give no assurance that the additional controls will be effective. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above. We cannot assure you that, as circumstances change, any additional material weakness will not be identified.
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Changes in Internal Control over Financial Reporting
In connection with the sale by the then stockholders of the Company of an aggregate of 3,664,641 shares of Common Stock of the Company, representing approximately 78.7% of the then issued and outstanding shares of Common Stock of the Company, and substantially all of the shares of Common Stock of the Company held by the such selling stockholders to 4M Industrial Oxidation, LLC, a Tennessee limited liability company, on March 31, 2017, Scott N. Beck (the then Companys Chief Executive Officer and Chairman) and V. Chase McCrea III (the then Companys Chief Financial Officer), resigned from the Company and appointed Joshua M. Kimmel as the Companys Chief Executive Officer and President. Other than the foregoing, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the fiscal quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Subsequent to the quarter ended March 31, 2017, on April 4, 2017, the Board of Directors appointed Rodney G. Grubb, Dr. Truman A. Bonds and Douglas A. Mentzer as members of the Board for a period of one year, until the next annual stockholders meeting and their respective successors are elected and qualified or upon their earlier resignation or removal. Also on April 4, 2017, the Board appointed Erwin W. Vahlsing, Jr. as the Companys Chief Financial Officer and Treasurer (Principal Financing and Accounting Officer), Rodney G. Grubb as the Companys Chief Operating Officer and Dr. Truman A. Bonds as the Companys Chief Technology Officer, each to serve at the pleasure of the Board until their successors are appointed or upon their earlier resignation or removal.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other information
Subsequent Events
On April 4, 2017, the Board of Directors of the Company established the size of the Board to consist of four members and appointed the following persons to fill such newly-created vacancies for a period of one year, until the next annual stockholders meeting and their respective successors are elected and qualified or upon their earlier resignation or removal:
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Name: |
| Board Position: |
Rodney G. Grubb |
| Chairman of the Board |
Dr. Truman A. Bonds |
| Director |
Douglas D. Mentzer |
| Director |
On April 4, 2017, the Board appointed the following persons as executive officers of the Company, to serve at the pleasure of the Board until their successors are appointed or upon their earlier resignation or removal:
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Name: |
| Office: |
Erwin W. Vahlsing Jr. |
| Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
Rodney G. Grubb |
| Chief Operating Officer |
Dr. Truman A. Bonds |
| Chief Technology Officer |
Reverse Merger with 4M Industrial Oxidation, LLC
As previously disclosed on a Form 8-K filed with the SEC on April 10, 2017, on April 6, 2017, the Company entered into an Agreement and Plan of Merger, dated April 6, 2017 (the Merger Agreement), with 4MIO Merger Sub, LLC, a Tennessee limited liability company and wholly-owned subsidiary of the Company (the Merger Sub), and 4MIO, for the purposes of consummating a reverse merger (the Merger).
Pursuant to the Merger Agreement, Merger Sub merged with and into 4MIO, with 4MIO being the surviving company and resulting in 4MIO becoming a wholly-owned subsidiary of the Company. The Merger was intended to constitute a tax-free reorganization within the meaning of Section 368 of the United States Internal Revenue Code of 1986, as amended.
In the Merger, the members of 4MIO exchanged their membership interests of 4MIO, representing 100% of the outstanding membership interests of 4MIO, for aggregate of 55 million (55,000,000) shares of common stock, par value $0.01 (the Common Stock), of the Company which represented approximately 78.46% of the shares of Common Stock of the Company based on an aggregate of 70,096,470 shares of Common outstanding upon consummation of the Merger.
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Capitalization Changes
On April 12, 2017 (the Record Date), the Board of Directors of the Company and the stockholders holding an aggregate of 50,640,679 outstanding shares of Common Stock, representing approximately 72.24% of all votes entitled to be voted at any annual or special meeting of stockholders of the Company or action by written consent (the Majority Stockholders), approved of the following corporate action (the Corporate Action) by written consent in lieu of a meeting as permitted under the Delaware General Corporation Law and the By-laws of the Company:
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| To file a Certificate of Amendment (the Amendment) to the Certificate of Incorporation of the Company to (i) increase the authorized amount of Common Stock of the Company from 100 Million (100,000,000) shares to 250 Million (250,000,000) shares; (ii) reduce the par value of the Common Stock from $0.01 to $0.0001 per share, and (iii) authorize 25,000 shares of blank check preferred stock, par value $0.0001 per share (Preferred Stock). |
The Company filed a Preliminary Information Statement with the Securities and Exchange Commission on April 12, 2017 (SEC) pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). On April 24, 2017, the Company filed a Definitive Information Statement with the SEC and filed the Amendment with the Secretary of State of Delaware. The Amendment became effective on May 15, 2017
Item 6. Exhibits
The following exhibits are filed as part of this report:
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Exhibit |
| Description |
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3.1* |
| Certificate of Amendment to the Certificate of Incorporation of Woodland Holdings Corp. filed with the Secretary of State of Delaware on April 24, 2017 |
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31.1* |
| Rule 13a-14(a) Certification by our chief executive officer |
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31.2* |
| Rule 13a-14(a) Certification by our chief financial officer |
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32.1* |
| Section 1350 Certification by our chief executive officer |
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32.2* |
| Section 1350 Certification by our chief financial officer |
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101.1 INS** |
| XBRL Instance Document |
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101.SCH** |
| XBRL Taxonomy Extension Schema Document |
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101.CAL** |
| XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB** |
| XBRL Taxonomy Extension Labels Linkbase Document |
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101.DEF** |
| XBRL Taxonomy Extension Definition Linkbase Document |
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101.PRE** |
| XBRL Taxonomy Extension Presentation Linkbase Document |
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* | Filed herewith |
** | Furnished herewith. Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Exchange Act of 1934 and otherwise are not subject to liability. |
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| WOODLAND HOLDINGS CORPORATION |
| Registrant |
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Date: May 15, 2017 | /s/ Erwin W. Vahlsing, Jr. |
| Erwin W. Vahlsing, Jr. |
| Chief Financial Officer (Principal Financial and Accounting Officer) |
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Exhibit 31.1
CERTIFICATION
I, Joshua M. Kimmel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Woodland Holdings Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) I Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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| /s/ Joshua M. Kimmel |
| Joshua M. Kimmel |
| Chief Executive Officer (Principal Executive Officer) |
Dated: May 15, 2017
Exhibit 31.2
CERTIFICATION
I, Erwin W. Vahlsing, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Woodland Holdings Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) I Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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| /s/ Erwin W. Vahlsing, Jr. |
| Erwin W. Vahlsing, Jr. |
| Chief Financial Officer (Principal Financial and Accounting Officer) |
Dated: May 15, 2017
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Joshua M. Kimmel, the President and Chief Executive Officer of Woodland Holdings Corporation, a Delaware corporation (the Company), hereby certify, that, to my knowledge:
1. The Quarterly Report on Form 10-Q for the period ended March 31, 2017 (the Report) of the Company fully complies with the requirements of Section 13(a)/15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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| /s/ Joshua M. Kimmel |
| Joshua M. Kimmel |
| Chief Executive Officer (Principal Executive Officer) |
Dated: May 15, 2017
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Erwin W. Vahlsing, Jr., the Chief Financing Officer of Woodland Holdings Corporation, a Delaware corporation (the Company), hereby certify, that, to my knowledge:
1. The Quarterly Report on Form 10-Q for the period ended March 31, 2017 (the Report) of the Company fully complies with the requirements of Section 13(a)/15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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| /s/ Erwin W. Vahlsing, Jr. |
| Erwin W. Vahlsing, Jr. |
| Chief Financial Officer (Principal Financial and Accounting Officer) |
Dated: May 15, 2017
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:
FIRST: That at a meeting of the Board of Directors of
Woodland Holdings Corp. |
resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered Four so that, as amended, said Article shall be and read as follows:
The total number of shares this Corporation shall have authority to issue is 250,025,000 of which 250,000,000 shares shall be designated Common Stock with a par value of $0.0001 per share, and 25,000 shares shall be designated as blank check Preferred Stock with a par value of $0.0001 per share. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, subject to limitations prescribed by law, to fix by resolution or resolutions the designations, powers, preferences, and rights and the qualifications, limitations, or restrictions thereof, of each such series of Preferred Stock, including without limitation, authority to fix by resolution or resolutions the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption price or prices, and liquidation preferences of any wholly unissued series of Preferred Stock, and the number of shares constituting such series and the designation thereof, or any of the foregoing. The Board of Directors is further authorized to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any series, the number of which was fixed by it, subsequent to the issue of shares of such series then outstanding, subject to the powers, preferences, and rights and the qualifications, limitations, and restrictions thereof stated in the resolution of the Board of Directors originally fixing the number of shares of such series. If the number of shares of any series is so decreased, then the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. |
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That this Amendment shall be effective on May 15, 2017.
IN WITNESS WHEREOF, said corporation has caused this certificate to be signed this 24th day of April 2017.
By:
_/s/ Joshua M. Kimmel______________________
(Authorized Officer)
Name:
Joshua M. Kimmel
Title:
Chief Executive Officer and President