10-Q 1 c53685_10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 10-Q ----------- (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2008 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM: TO: COMMISSION FILE NUMBER 000-52338 SLM HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 42-1555574 --------------------------------- ------------- (State of or other jurisdiction (IRS Employer of incorporation or organization) I.D. No.) 99 Sunnyside Blvd., Woodbury, NY 11797 (Address of Principal Executive Office) (866) 756-5323 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one): Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_| (Do not check if a smaller reporting company) Smaller reporting company |X| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AS OF MAY 15, 2008 ----------------------------------------- ------------------------------------- Common stock, $.0001 par value 60,685,833 TABLE OF CONTENTS Page ---- PART I FINANCIAL INFORMATION................................................1 ITEM 1. FINANCIAL STATEMENTS......................................1 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.................................................2 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS..............................................4 ITEM 4. CONTROLS AND PROCEDURES...................................4 PART II OTHER INFORMATION....................................................5 ITEM 1. LEGAL PROCEEDINGS.........................................5 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS..................................................5 ITEM 3. DEFAULTS UPON SENIOR SECURITIES...........................5 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......5 ITEM 5. OTHER INFORMATION.........................................5 ITEM 6. EXHIBITS..................................................5 SIGNATURE .................................................................... 6 i PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INDEX TO FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets March 31, 2008 (Unaudited) and December 31, 2007 (Audited).........................................F-1 Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2008 and 2007......................F-2 Consolidated Statements of Stockholders' Deficiency (Unaudited) for the Three Months Ended March 31, 2008..,,,,,,,,,,,,,,,,,,,,,,,......F-3 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2008 and 2007......................F-4 Notes to Unaudited Condensed Consolidated Financial Statements...............F-5 1 SLM HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS

THE ACCOMPANYING NOTES TO ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-1 SLM HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

THE ACCOMPANYING NOTES TO ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-2 SLM HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2008

THE ACCOMPANYING NOTES TO ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-3 SLM HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31,

THE ACCOMPANYING NOTES TO ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-4 SLM HOLDINGS, INC. (An Exploration Stage Entity) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2008 AND 2007 NOTE 1 - NATURE OF THE BUSINESS Sales Lead Management, Inc. ("SLM") was incorporated as a New York corporation on May 10, 2001 ("Inception"). SLM has developed software tools and data files which are provided via an application service provider ("ASP") model to a variety of sales professionals throughout the country. SLM's technology allows the users to access The Broker's e-Vantage ("TBEV") system, a prospect management and lead fulfillment solution for financial professionals. SLM has devoted substantially all its efforts to research and product development and raising capital. NOTE 2 - GOING CONCERN The accompanying consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has a limited operating history and has incurred losses from operations since its inception. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with regard to these matters include continued development and marketing of its products as well as seeking additional financing arrangements. Although, management continues to pursue these plans, there is no assurance the Company will be successful in obtaining sufficient fees from its products or financing on terms acceptable to the Company. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated Financial Statements include the accounts of SLM Holdings, Inc., the parent company, and its wholly owned subsidiary, Sales Lead Management, Inc., after elimination of all material intercompany accounts, transactions, and profits. USE OF ESTIMATES In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INTANGIBLE ASSETS Intangible assets are initially measured based on their estimated fair values. Intangible assets are being amortized on a straight-line basis over either a 10-year period or over the contract period. F-5 SLM HOLDINGS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) MARCH 31, 2008 AND 2007 IMPAIRMENT OF GOODWILL The Company evaluates the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit's carrying amount, including goodwill. The fair value of the reporting unit is estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies' data. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. The Company's evaluation of goodwill completed during the year resulted in no impairment losses. REVENUE RECOGNITION Revenues from its software tools and data services are recognized ratably as earned over the term of the subscriptions. The Company invoices and is paid on a monthly basis for access to its proprietary software and database. LOSS PER COMMON SHARE Basic loss per share is computed as net loss available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and convertible debt. For the three months ended March 31, 2008 and 2007, 12,561,173 and 12,324,903, respectively, of options, warrants and convertible debt were excluded from the diluted loss per share computation, as their effect would be anti-dilutive. INCOME TAXES The Company uses the liability method to account for income taxes. The primary objectives of accounting for income taxes are to (a) recognize the amount of income tax payable for the current year and (b) recognize the amount of deferred tax liability or asset based on management's assessment of the 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 those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. F-6 SLM HOLDINGS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) MARCH 31, 2008 AND 2007 At March 31, 2008, the Company had net operating loss carryforwards of approximately $6,210,000, which expire through 2026. Pursuant to Section 382 of the Internal Revenue Code regarding substantial changes in ownership, utilization of these losses may be limited. Based on this and the fact that the Company has generated operating losses through March 31, 2008, the deferred tax asset of approximately $2,318,000 has been offset by a valuation allowance of $2,318,000. ACCOUNTING FOR STOCK-BASED COMPENSATION The Company consummated various transactions where it paid the consideration primarily in options or warrants to purchase its common stock. These transactions include financing transactions and providing incentives to attract, retain and motivate employees, officers and directors. When options or warrants to purchase the Company's common stock are used as incentives for employees, officers or directors, the Company uses the fair value method required by SFAS No. 123R. The fair value of options or warrants to purchase the Company's common stock is determined using the Black-Scholes valuation method, a method widely accepted as providing the fair market value of an option or warrant to purchase stock at a fixed price for a specified period of time. Black-Scholes uses five variables to determine market value as follows: o exercise price (the price to be paid for a share in the Company's common stock); o price of the Company's common stock on the day the options or warrants are granted; o the expected number of days that the options or warrants will be held before they are exercised, based on the average of their vesting and contractual periods; o trading volatility of the Company's common stock, based on historical prices for a retrospective period equal to the expected holding period together with certain other factors as applicable; and o the annual risk free interest rate on the day the option or warrant is granted for the expected holding period. The determination of expected volatility requires management to make certain estimates and the actual volatility may vary significantly from that estimate. Accordingly, the determination of the resulting expense is based on a management estimate. The Company determined to use a zero volatility on the basis that there are no other companies to use as a guideline and the lack of trading in the stock. The fair value of options at date of grant in 2008 and 2007 was estimated using the Black-Scholes fair value based method with the following weighted average assumptions: 2008 2007 --------- ---------- Expected life (years) 5 5 Risk free interest rate 2.46% 4.54% Volatility 0 0 Dividends 0 0 F-7 SLM HOLDINGS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) MARCH 31, 2008 AND 2007 The weighted average fair value of each option at date of grant using the Black-Scholes fair value based method during 2007 was estimated at $.07. There were no options issued in 2008. The following table represents our stock options granted, exercised, and forfeited during the period ended March 31, 2008 and 2007.

NOTE 4 - STOCKHOLDERS' DEFICIENCY WARRANTS The following table summarizes the Company's activity as it relates to its warrants for the three months ended March 31, 2008 and 2007: WEIGHTED AVERAGE SHARES EXERCISE PRICE ----------------- -------------- Balance outstanding at January 01, 2007 6,589,369 0.35 Exercised 675,000 0.02 ----------------- Balance outstanding at January 01, 2008 7,412,181 0.31 Issued 127,794 0.27 ----------------- Balance outstanding at March 31, 2008 7,539,975 0.31 The following is additional information with respect to the Company's warrants as of March 31, 2008. F-8 SLM HOLDINGS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) MARCH 31, 2008 AND 2007

F-9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION THIS FORM 10-Q INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES ACT, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR THE EXCHANGE ACT. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED IN THIS FORM 10-Q THAT ADDRESS ACTIVITIES, EVENTS OR DEVELOPMENTS THAT WE EXPECT OR ANTICIPATE WILL OR MAY OCCUR IN THE FUTURE, INCLUDING SUCH THINGS AS FUTURE CAPITAL EXPENDITURES (INCLUDING THE AMOUNT AND NATURE THEREOF), BUSINESS STRATEGY AND MEASURES TO IMPLEMENT STRATEGY, COMPETITIVE STRENGTH, GOALS, EXPANSION AND GROWTH OF OUR BUSINESS AND OPERATIONS, PLANS, REFERENCES TO FUTURE SUCCESS, REFERENCE TO INTENTIONS AS TO FUTURE MATTERS AND OTHER SUCH MATTERS ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE BASED ON CERTAIN ASSUMPTIONS AND ANALYSES MADE BY US IN LIGHT OF OUR EXPERIENCE AND OUR PERCEPTION OF HISTORICAL TRENDS, CURRENT CONDITIONS AND EXPECTED FUTURE DEVELOPMENTS AS WELL AS OTHER FACTORS WE BELIEVE ARE APPROPRIATE IN THE CIRCUMSTANCES. HOWEVER, WHETHER ACTUAL RESULTS AND DEVELOPMENTS WILL CONFORM TO OUR EXPECTATIONS AND PREDICTIONS IS SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, AND OTHER FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FORM 10-Q ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND WE CANNOT ASSURE YOU THAT THE ACTUAL RESULTS OR DEVELOPMENTS ANTICIPATED BY US WILL BE REALIZED OR, EVEN IF REALIZED, THAT THEY WILL HAVE THE EXPECTED CONSEQUENCES TO OR EFFECTS ON US, OUR BUSINESS OR OPERATIONS. WE HAVE NO INTENTION, AND DISCLAIM ANY OBLIGATION, TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE RESULTS OR OTHERWISE. UNLESS OTHERWISE INDICATED OR THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO "SLM," "THE COMPANY," "WE," "US" OR "OUR" AND SIMILAR TERMS REFER TO SLM HOLDINGS, INC. GENERAL SLM Holdings, Inc. (the "Company, "we," "our," or "us"), a Delaware corporation, was formed on June 8, 2004 when a name change was effected from Southwest Mortgage Corp., which was incorporated on October 24, 2002 in the State of Delaware ("Southwest"), Southwest was the surviving company from the Nortex Refrigerated Trucking bankruptcy proceedings. On August 21, 2007, the Company acquired VerticalFalls Software, Inc. ("VerticalFalls"), a privately held distributor of desktop-based software. Under the terms of the Agreement, the Company acquired the name and the right to use the name "VerticalFalls Software, Inc." and all copyrights, trademarks and trade names related thereto as well as all title and rights to the Assets then owned by VerticalFalls, as enumerated in the agreement between the Company and VerticalFalls. SLM Holdings, Inc. has been approved by the NASD for quotation on the Over the Counter Bulletin Board under the quotation symbol "SMHI." It is the holding company for our operating subsidiary, Sales Lead Management, Inc. ("SLM"), a New York corporation formed in May 2001. SLM has developed software tools and data files which are provided via an application service provider ("ASP") model to a variety of sales professionals throughout the country. SLM's technology allows the users to access The Broker's e-Vantage ("TBeV") system, a prospect management and lead fulfillment solution for financial professionals. SLM has devoted substantially all its efforts to research and product development and raising capital. As the Company and its core products evolved, the acronym SLM was changed to stand for "Software Leveraged Marketing." Our executive office is located at 99 Sunnyside Blvd., Woodbury, New York 11797. Our telephone number is (866) 756-5323. We maintain an Internet Web site at HTTP://WWW.SLMBIZ.COM. Information on our Internet website is for informational purposes only. 2 FOR THE THREE MONTHS ENDED MARCH 31, 2007 RESULTS OF OPERATIONS REVENUES. We generated revenue of $338,611 for the three months ended March 31, 2008, as compared to $51,586 for the three months ended March 31, 2007. The increase in revenues from that three-month period in 2008 to 2007 was primarily due to increase in marketing, which has generated more revenue. OPERATING EXPENSES. For the three months ended March 31, 2008, our total operating expenses were $545,697, as compared to total operating expenses of $486,889 for the three months ended March 31, 2007. The increase in total operating expenses was due primarily to increase of consulting fees of approximately $168,000, which were fees associated with setting up the new overseas customer call center, which also caused our increase in travel expenses. In addition, marketing expenses have increased approximately $50,000 due to a new aggressive marketing plan. INTEREST EXPENSE. Interest for the three months ended March 31, 2008 was $57,586, a difference of $975,103, from 2007 of $1,032,689. This decrease was primarily due to the number of investors and the conversion of debt to stock. In 2007, the Company had a large number of investors who invested into the company and who had converted their interest to stock. LIQUIDITY AND CAPITAL RESOURCES We had cash of $6,300 and accounts receivable of $9,712 as of March 31, 2008. To date we have funded our operations primarily from multiple sales of the private placement of our securities to accredited investors, loans from accredited investors including a Board advisor and an Institutional placement of a senior loan with the Aegis New York State Venture Capital Fund. Our Executive Chairman has also loaned the Company $100,000. We have raised approximately $5,000,000 to date. To date, we have incurred substantial losses, and will require financing for working capital to meet our operating obligations. We anticipate that we will require financing on an ongoing basis for possibly the first two quarters of 2008, which we will seek. There can be no assurance that such financing will be available. We intend to seek to raise up to $5,000,000 in additional funding through the private issuance of common stock. The net proceeds from the offering will be used to pay down any non-converted Notes including Aegis Capital and leave the Company in excess of $3,000,000 of net proceeds to operate and grow sales and earnings for the next twenty-four months. SLM may also utilize the funds along with its shares to acquire one several other possible private software companies that Management has identified to have compelling synergies to SLM and our product line. We have not entered into any agreements with any entity or banker for such financing and there can be no assurance that we will be able to do so. The Software as a Service model (SOS) that we have structured our business around is an extremely tried and tested approach. Management believes that if handled properly, the margins for the right software solution can be significant as witnessed by many of the industry leaders including IBM and Salesforce.com. Management anticipates turning profitable sometime during the second quarter of 2008. The costs to be incurred, as well as the obligations that need to be met by reason of becoming a publicly reporting company will be taken from revenues earned through operations. We also intend to secure additional financing from outside sources in order to meet these costs and obligations. At this time, no agreements have been entered into relative to future financing of the Company and there are assurances that such will be obtained. 3 OFF BALANCE SHEET REPORTS The Company had no off balance sheet transactions during the quarter ended March 31, 2008. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS There have been no significant changes in our market risks since the year ended December 31, 2007. For more information, please read the consolidated financial statements and notes thereto included in our Annual Report on Form 10-KSB for the year ended December 31, 2007. ITEM 4. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures. Based on the Chief Executive and Financial Officer's evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, he has concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective in timely alerting him to material information required to be included in Company's periodic Securities and Exchange Commission reports. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, he reviewed Company's internal controls over financial reporting and there have been no changes in our internal controls or in other factors in the last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. 4 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any litigation. Our address for service of process is 99 Sunnyside Blvd., Woodbury, NY 11797. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS EXHIBIT NO. IDENTIFICATION OF EXHIBIT ----------- ----------------------------------------------------------------- 3.1 Articles of Incorporation* 3.2 By-Laws* 31.1 Sarbanes Oxley Section 302 Certification 32.1 Sarbanes Oxley Section 906 Certification * Previously filed 5 SIGNATURE In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized. SLM HOLDINGS, INC. By: /S/ JASON BISHARA ---------------------------------- Jason Bishara Principal Executive Officer Date: May 20, 2008 6

SLM Holdings, Inc. 10-Q