December 5, 2016
Youngsville, Louisiana – RedHawk Holdings Corp. (OTCQB: IDNG) (“RedHawk” or the “Company”) announced today a consolidated net loss of $187,175 ($nil per share) on gross revenues of $499,280 for the three month period ended September 30, 2016. These first quarter results compare to a net loss $108,404 ($nil per share) on minimal revenues for the comparable three month period ended September 30, 2015.
The first quarter’s results included a consolidated net loss from operations of approximately $140,000 which included charges of approximately $260,000 for new product incentive discounts offered to customers, approximately $70,000 of non-recurring legal fees and approximately $25,000 of non-cash charges. Exclusive of the new product incentive discounts and the non-recurring legal fees, the Company would have reported net income from operations of approximately $190,000 and cash flow from operations of approximately $215,000.
These sales discounts were offered to customers in connection with the Company’s introduction of its branded generic pharmaceuticals and certain generic “specials” in the United Kingdom. While a small portion of these discounts are offered as a part of current distribution agreements, the Company believes much of these offered discounts will gradually decrease as its branded generic products and “specials” continue to gain market acceptance. “Specials” offered by the Company are unlicensed non-narcotic made-to-order or customized medicinal products.
The non-recurring legal fees for the three month period ended September 30, 2016, relate primarily to costs incurred in connection with unexpected due diligence matters pertaining to certain strategic transactions currently in process, costs and expenses incurred in connection with the continued pursuit of the resolution of certain regulatory matters, increased complexity in regulatory filings and costs and expenses incurred in connection with certain ongoing litigation claims against third parties.
The Company said, “During this first quarter of our 2017 fiscal year, we focused primarily on launching the operations of our pharmaceutical business unit. We are very pleased with the performance and efforts of our UK management group. This business unit has quickly attained profitability despite the higher than normal offered discounts. Further, as this business expands the introduction of its branded generic products and ‘specials’ into the United Kingdom market, we believe our pharma unit will continue to increase revenues as it attains greater market share and product awareness. While our pharmaceutical unit continues to focus on revenue growth, increased market acceptance, new product development and improved profitability, our medical device business unit has now launched SANDD, our needle destruction device.”
“During the second quarter ending December 31, 2016, the manufacturing process of SANDD commenced. Initial marketing of our needle destruction device remains scheduled to start in the United Kingdom and certain Middle Eastern countries during this same three month period ending December 31, 2016. Expectations for the marketing of SANDD in the United States is still targeted to commence during the three month period ending March 31, 2017.”
“Initial SANDD units are being manufactured and designed primarily for consumer use but do have limited commercial applications. During the three month period ending March 31, 2017, we expect to begin engineering and testing of a SANDD model more specifically designed for commercial applications. We believe this disciplined approach to launching our individual business units better prepares us to meet with unplanned market challenges as they arise.
“We continue to investigate several unexpected matters which came to our attention during the due diligence review of certain previously announced strategic transactions. While we remain optimistic that these matters will be resolved to our satisfaction, there can be no assurance as to when resolution may occur. Additionally, our legal advisors have been unable to resolve certain regulatory matters pertaining to Daniel J. Schreiber’s position as a significant shareholder of the Company. Regulators remain concerned about the protection of the Company’s shareholders and market transparency as long as Mr. Schreiber remains a ‘significant shareholder.’ We believe we have remedies available to resolve this situation and we have engaged counsel to begin pursuing these remedies.”