UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2015
| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from ______________ to _____________
Commission file number 333-177792
THE TEARDROPPERS, INC.
(Exact name of small business issuer as specified in its charter)
| Nevada | 20-4168979 |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
3500 75th Street West, Ste. SWS
Rosamond, CA 93560
(Address of principal executive offices)
949-751-2173
(Issuer’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issues (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yesx Noo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx Noo
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Nox
APPLICABLE ONLY TO CORPORATE ISSUES
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
There were 37,750,000 shares of the registrant’s common stock, $0.001 par value per share, outstanding on August 19, 2015.
Indicate by check mark whether the Registrant is a large accelerated filer, an accredited filer, a non-accredited filer, (or a smaller reporting company in Rule 12b-2 of the Exchange Act.(check one)
| Large Accredited filero | Accelerated filero |
| Non-accredited filero | Smaller reporting companyx |
THE TEARDROPPERS, INC.
TABLE OF CONTENTS
| Page | |||
| Part I – FINANCIAL INFORMATION | 4 | ||
| Item 1. | Condensed Financial Statements: | 4 | |
| Condensed Balance Sheets at June 30, 2015 (unaudited) and December 31, 2014 (audited) | 4 | ||
| Condensed Statements of Operations for the three and six month periods ended June 30, 2015 and 2014 (unaudited) | 5 | ||
| Condensed Statements of Cash Flows for the six month period ended June 30, 2015 and June 30,2014 (unaudited) | 6 | ||
| Condensed Statements of Changes in Stockholders’ Equity (Deficit) for the period from December 31, 2013 (inception) through June 30, 2015 (unaudited) | 7 | ||
| Notes to Condensed Financial Statements (unaudited) | 8 | ||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 17 | |
| Item 4. | Controls and Procedures | 17 | |
| Part II – OTHER INFORMATION | 18 | ||
| Item 1. | Legal Proceedings | 18 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 18 | |
| Item 3. | Defaults Upon Senior Security | 18 | |
| Item 4. | Mine Safety Disclosures | 18 | |
| Item 5. | Other Information | 18 | |
| Item 6. | Exhibits | 18 | |
| Signatures | 19 | ||
| 2 |
THE TEARDROPPERS, INC.
Financial Statements
(Unaudited)
TABLE OF CONTENTS
| Page | |
| FINANCIAL STATEMENTS | |
| Condensed Balance Sheets (unaudited) | 4 |
| Condensed Statements of Operations (unaudited) | 5 |
| Condensed Statements of Cash Flows (unaudited) | 6 |
| Condensed Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) | 7 |
| Notes to Condensed (unaudited) Financial Statements | 8 |
| 3 |
PART I – FINANCIAL INFORMATION
ITEM 1. Financial Statements
TEARDROPPERS, INC.
CONDENSED BALANCE SHEETS
| (Unaudited) | (Audited) | |||||||
| June 30, | December 31, | |||||||
| 2015 | 2014 | |||||||
| Assets: | ||||||||
| Current Assets | ||||||||
| Cash | $ | 99 | $ | 27,125 | ||||
| Total Current Assets | 99 | 27,125 | ||||||
| Fixed Assets: | ||||||||
| Property & equipment | 20,000 | 20,000 | ||||||
| Less: accumulated depreciation | (3,833 | ) | (1,833 | ) | ||||
| Fixed assets, net | 16,167 | 18,167 | ||||||
| Total Assets | $ | 16,266 | $ | 45,292 | ||||
| Liabilities and Stockholders' Deficit: | ||||||||
| Current Liabilities | ||||||||
| Loan payable, related party | $ | 300,000 | $ | 300,000 | ||||
| Line of credit, related party | 159,000 | 75,000 | ||||||
| Accrued interest, related party | 22,376 | 740 | ||||||
| Total Current Liabilities | 481,376 | 375,740 | ||||||
| Total Liabilities | 481,376 | 375,740 | ||||||
| Stockholders' Deficit: | ||||||||
| Preferred stock, par value $0.001, 20,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2015 (unaudited) and December 31, 2014, respectively | – | – | ||||||
| Common stock, par value $0.001, 100,000,000 shares authorized and 37,750,000 and 37,800,000 shares issued and outstanding as of June 30, 2015 (unaudited) and December 31, 2014 respectively. | 37,750 | 37,800 | ||||||
| Additional paid in capital | 47,750 | 48,700 | ||||||
| Accumulated deficit | (550,610 | ) | (416,948 | ) | ||||
| Total Stockholders' Deficit | (465,110 | ) | (330,448 | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | 16,266 | $ | 45,292 | ||||
The accompanying notes are an integral part of these condensed unaudited financial statements.
| 4 |
TEARDROPPERS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues | $ | – | $ | – | $ | – | $ | – | ||||||||
| Operating Expenses: | ||||||||||||||||
| Consulting | 2,500 | 2,500 | 13,000 | 29,103 | ||||||||||||
| Consulting, related party | – | – | 44,889 | 139,087 | ||||||||||||
| General & administrative | 1,950 | 13,170 | 18,874 | 29,114 | ||||||||||||
| Professional fees | 14,501 | 14,500 | 35,263 | 25,000 | ||||||||||||
| Total Operating Expenses | 18,951 | 30,170 | 112,026 | 222,304 | ||||||||||||
| Operating (Loss) | (18,951 | ) | (30,170 | ) | (112,026 | ) | (222,304 | ) | ||||||||
| Interest Expense, related party | (11,219 | ) | – | (21,636 | ) | – | ||||||||||
| (Loss) Before Taxes | (30,170 | ) | (30,170 | ) | (133,662 | ) | (222,304 | ) | ||||||||
| Income Tax Provision | – | – | – | – | ||||||||||||
| Net (Loss) | $ | (30,170 | ) | $ | (30,170 | ) | $ | (133,662 | ) | $ | (222,304 | ) | ||||
| Net (loss) per share- basic and diluted | $ | (0.00 | )* | $ | (0.00 | )* | $ | (0.00 | )* | $ | (0.01 | ) | ||||
| Weighted average common shares outstanding- basic and diluted | 37,750,000 | 36,943,132 | 37,756,630 | 37,233,425 | ||||||||||||
* denotes a loss of less than $(0.01) per share.
The accompanying notes are an integral part of these condensed unaudited financial statements.
| 5 |
TEARDROPPERS, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
| Total | ||||||||||||||||||||||||||||||||
| Stock | Additional | Stockholders' | ||||||||||||||||||||||||||||||
| Preferred | Common | Subscription | Paid in | Accumulated | Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Receivable | Capital | Deficit | (Deficit) | |||||||||||||||||||||||||
| Balance December 31, 2013 - audited | – | $ | – | 36,600,000 | $ | 36,600 | $ | (1,000 | ) | $ | 11,400 | $ | (46,922 | ) | $ | 78 | ||||||||||||||||
| Shares issued for cash | – | – | 800,000 | 800 | 1,000 | 15,200 | – | 17,000 | ||||||||||||||||||||||||
| Shares issued for reduction of debt | – | – | 508,333 | 508 | – | 67,492 | – | 68,000 | ||||||||||||||||||||||||
| Shares issued for services | – | – | 225,000 | 225 | – | 4,275 | – | 4,500 | ||||||||||||||||||||||||
| Shares cancelled | – | – | (333,333 | ) | (333 | ) | – | (49,667 | ) | – | (50,000 | ) | ||||||||||||||||||||
| Net loss for year | – | – | – | – | – | – | (370,026 | ) | (370,026 | ) | ||||||||||||||||||||||
| Balance December 31, 2014 - audited | – | – | 37,800,000 | 37,800 | – | 48,700 | (416,948 | ) | (330,448 | ) | ||||||||||||||||||||||
| Shares returned | – | – | (50,000 | ) | (50 | ) | – | (950 | ) | – | (1,000 | ) | ||||||||||||||||||||
| Net loss for the period | – | – | – | – | – | – | (133,662 | ) | (133,662 | ) | ||||||||||||||||||||||
| Balance June 30, 2015 - unaudited | – | $ | – | 37,750,000 | $ | 37,750 | $ | – | $ | 47,750 | $ | (550,610 | ) | $ | (465,110 | ) | ||||||||||||||||
The accompanying notes are an integral part of these condensed unaudited financial statements.
| 6 |
TEARDROPPERS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the six months ended | For the six months ended | |||||||
| June 30, | June 30, | |||||||
| 2015 | 2014 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss for the Period | $ | (133,662 | ) | $ | (222,304 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 2,000 | 2,708 | ||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Increase in accrued interest | 21,636 | – | ||||||
| Net Cash Used in Operating Activities | (110,026 | ) | (219,596 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | – | (65,000 | ) | |||||
| Net Cash (Used in) Provided by Investing Activities | – | (65,000 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds (refund) from sale of stock (cancellation of stock sale) | (1,000 | ) | 89,500 | |||||
| Proceeds from line of credit to relate party | 84,000 | 75,000 | ||||||
| Proceeds from loan from related party | – | 75,000 | ||||||
| Net Cash Provided by Financing Activities | 83,000 | 239,500 | ||||||
| Net (Decrease) Increase in Cash | (27,026 | ) | (45,096 | ) | ||||
| Cash at Beginning of Period | 27,125 | 75,078 | ||||||
| Cash at End of Period | $ | 99 | $ | 29,982 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | – | $ | – | ||||
| Franchise and income taxes | $ | – | $ | – | ||||
The accompanying notes are an integral part of these condensed unaudited financial statements.
| 7 |
TEARDROPPERS, INC.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2015 AND 2014
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
On June 3, 2013, Teardroppers, Inc. (the “Company”, “we”, “us”, or “our”), was incorporated under the laws of the state of Nevada.
We intend to enter the business of mobile billboard advertising by offering to provide billboard advertising space on custom designed "Teardrop Trailers". Teardrop Trailers, are usually designed for short-period accommodations for vacationers and travelers. Teardrop Trailers are designed to be towed behind small economy sized vehicles and pickup trucks.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Interim financial statements
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the final results that may be expected for the year ended December 31, 2015. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2014 filed with the SEC.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Such estimates include management’s assessments of the carrying value of certain assets, useful lives of assets, and related depreciation and amortization methods applied.
Cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At June 30, 2015 and December 31, 2014, the Company had no cash equivalents.
Fair value of financial instruments
The Company adopted the provisions of FASB Accounting Standards Codification (“ASC”) 820 (the “Fair Value Topic”) which defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements.
The Fair Value Topic defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. It also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels.
| 8 |
Fair value of financial instruments
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
A) Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Prices may be indicated by pricing guides, sale transactions, market trades, or other sources;
B) Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost); and
C) Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about the future amounts (includes present value techniques, and option-pricing models). Net present value is an income approach where a stream of expected cash flows is discounted at an appropriate market interest rate.
Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. An active market for an asset or liability is a market in which transactions for the asset or liability occur with significant frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Example of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company’s assessment of the assumptions that are market participants would use in pricing the asset or liability.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable, accrued expenses, and deferred revenue approximate their fair value because of the short maturity of those instruments. The Company’s loan payable related party and line of credit related party approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at June 30, 2015 and December 31, 2014.
The Company had no assets and/or liabilities measured at fair value on a recurring basis for as of June 30, 2015 and December 31, 2014, respectively, using the market and income approaches.
Property and equipment
Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method over the assets estimated useful life of three (3) years for equipment, five (5) years for automobile, and seven (7) years for furniture and fixtures. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.
Commitments and contingencies
The Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
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Revenue recognition
The Company follows paragraph 605-10-S99-1 of the FASB ASC for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable and (iv) collectability is reasonably assured. In addition, the Company records allowances for accounts receivable that are estimated to not be collected.
Income taxes
The Company follows Section 740-10-30 of the FASB ASC, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB ASC (“Section 740-10-25”) with regards to uncertainty in income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its assets and/or liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Stock-based compensation
In December 2004, the FASB issued FASB ASC No. 718,Compensation – Stock Compensation (“ASC No. 718”). Under ASC No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by ASC No. 718. FASB ASC No. 505,Equity Based Payments to Non-Employees, defines the measurement date and recognition period for such instruments. In general, the measurement date is when either (a) a performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB ASC.
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Net income (loss) per share
The Company computes basic and diluted earnings per share amounts pursuant to section 260-10-45 of the FASB ASC. Basic earnings per share is computed by dividing net income (loss) available to common shareholders, by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share is computed by dividing net income (loss) available to common shareholders by the diluted weighted average number of shares of common stock during the period. The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day of the year for any potentially diluted debt or equity.
There were no potentially dilutive shares issued or outstanding during the three and six month periods ended June 30, 2015 or 2014.
Subsequent events
The Company follows the guidance in Section 855-10-50 of the FASB ASC for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.
Recently issued accounting pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 – GOING CONCERN
The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company has a minimum cash balance available for payment of ongoing operating expenses and has incurred losses since inception and anticipates future losses in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. Its continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company.
NOTE 4 – FIXED ASSETS
Property and equipment consists of the following at June 30, 2015 and December 31, 2014:
| June 30, 2015 | December 31, 2014 | |||||||
| Property and equipment, net | $ | 20,000 | $ | 20,000 | ||||
| Less: accumulated depreciation | (3,833 | ) | (1,833 | ) | ||||
| Property and equipment, net | $ | 16,167 | $ | 18,167 | ||||
Depreciation expense for the three and six month periods ended June 30, 2015 was $1,000 (2014 - $0) and $2,000 (2014 - $0), respectively.
In May of 2014, the Company purchased two automobiles to be used in promotional and operational activities for $65,000.The Company issued two notes payable totally $65,000 as consideration. Thenotes payable were immediately converted into 433,333 common shares of the Company leaving a zero balance on both notes payable.The two automobiles sold to the Company were owned by a related party to the Company. On September 1, 2014, the Company agreed to return one of the trucks which was purchased through the issuance of a $50,000 note payable and later converted into 333,333 common shares. The 333,333 common shares were returned to treasury.
In October of 2014, the Company purchased and assembled a custom trailer to be used in mobile billboard advertising operations. The cost basis of the custom trailer is $5,000.
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NOTE 5 – LOAN PAYABLE, RELATED PARTY
On December 12, 2014, the Company entered into a loan agreement with Gemini Southern, LLC whereby the monies paid to the Company by Gemini Southern, LLC pursuant to the consulting agreement dated September 20, 2013 ($300,000 as of June 30, 2015 and December 31, 2014) would be repaid by the Company. The balance will be paid back, with interest commencing on January 1, 2015 at a rate of 10% per annum, with a maturity date of December 12, 2015. As of June 30, 2015 and December 31, 2014, the Company has a loan payable from related party balance of $300,000.
NOTE 6 – LINE OF CREDIT, RELATED PARTY
On February 25, 2014, the Company entered into a line of credit with DEVCAP Partners, LLC, a California limited liability company, for an amount up to $450,000 with a maturity date of June 1, 2017, bearing interest of 10% per annum. DEVCAP Partners, LLC is a related party to the Company as they are the majority shareholder of the Company.
In November of 2014, the Company drew $75,000 from their line of credit with DEVCAP Partners, LLC. In the first and second quarters of 2015, a further $75,000 and $9,000, respectively, was advanced to the Company under the line of credit. As of June 30, 2015, the Company had drawn down a balance of $159,000 under the line of credit, related party.
NOTE 7 – RELATED PARTY TRANSACTIONS
Office space
We currently occupy approximately1,500 square feet of office and garage space at 3500 75th Street West, Rosamond, California. We share this space with Matthew D. Jackson, our Chief Marketing Officer. Presently, we do not incur any expenses for the use of this facility.
Loans from related party (Gemini Southern, LLC)
The Company has a loan agreement with Gemini Southern, LLC, a private corporation which has a managing member, Kevin O’Connell, who is also a managing member of DEVCAP Partners, LLC, the majority shareholder in the Company. See Note 5 for further disclosure.
Line of credit from related party
The Company has a line of credit agreement with DEVCAP Partners, LLC whom is also the majority shareholder in the Company. See Note 6 for further disclosure.
Consulting expense to related party (DEVCAP Partners, LLC)
On January 1, 2014, the Company executed a three year consulting agreement with DEVCAP Partners, LLC, (“DEVCAP”), whereby the Company agreed to pay $7,500 a month for consulting services to be provided to the Company such as marketing, architectural development, accounting, finance, corporate structure and tax planning.
Purchase of equipment through issuance of note payable to related party
In May of 2014, the Company purchased two automobiles to be used in promotional and operational activities for a total price of $65,000. The Company issued two notes payable totally $65,000 as consideration. The notes payable were immediately converted into 433,333 common shares of the Company leaving a zero balance on both notes payable. The two automobiles sold to the Company were owned by the father of our majority shareholder Kevin O’Connell. On September 1, 2014, the Company returned one of the trucks which was purchased through the issuance of a $50,000 note payable and later converted into 333,333 common shares. The 333,333 common shares were returned to treasury.
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NOTE 8 – STOCKHOLDERS’ DEFICIT
At the time of incorporation, the Company was authorized to issue 10,000 shares of common stock and 1,000 shares of preferred stock with a par value of $0.001. The Company amended its articles of incorporation to increase it authorized shares to 100,000,000 shares of common stock and 20,000,000 shares of preferred stock, both $0.001 par value.
In the year ended December 31, 2014, the Company issued 1,533,333 shares of common stock of which 800,000 shares were for $17,000 cash, 508,333 shares were for the reduction of $65,000 in notes payable and $3,000 in accrued expenses and 225,000 shares were for consulting services rendered in the period. We valued the cost of the consulting services at the average price of stock sold for cash, $0.02, which resulted in a non-cash consulting expense of $4,500. The Company also cancelled 333,333 shares, further described in Note 4.
During the first three months of 2015, 50,000 shares were returned to the Company and the former investors were repaid $1,000.
NOTE 9 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, "Subsequent Events" the Company has analyzed its operations subsequent to June 30, 2015 to the date these financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these financial statements.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Safe Harbor for Forward-Looking Statements
When used in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position. Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual result may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed under the “Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operations,” and also include general economic factors and conditions that may directly or indirectly impact the Company’s financial condition or results of operations.
Business of The Company
Teardroppers, Inc., (the “Company”), is a Nevada corporation which was formed in June of 2013.
Mobile Billboard Advertising
We intend to enter the business of mobile billboard advertising by offering to provide billboard advertising space on custom designed "Teardrop Trailers". Teardrop Trailers, are usually designed for short-period accommodations for vacationers and travelers. Teardrop Trailers are designed to be towed behind small economy sized vehicles and pickup trucks. A Teardrop Trailer, also known as a "Teardrop Camper Trailer", is a streamlined, compact, lightweight travel trailer, which gets its name from its teardrop profile. We have ordered the assembly of one Teardrop Trailer from an independent partnership (the "Partnership"), based upon Teardrop Trailer designs provided by the Partnership and approved by us. This Teardrop Trailer is was delivered on January 15, 2015. In addition, we intend to produce a second Teardrop trailer using a custom chassis from an independent supplier. The Teardrop Trailer will be assembled by an independent contractor and is expected to delivered to us by December 31, 2015. In the future, we intend to obtain additional Teardrop Trailers by using independent contractors.
The Teardrop Trailer
Teardrop Trailers are designed to be towed behind small economy sized vehicles, pickup trucks and any qualified tow vehicles. A Teardrop Trailer, also known as a "Teardrop Camper Trailer", is a streamlined, compact, lightweight travel trailer, which gets its name from its teardrop profile. We have ordered the assembly of one Teardrop Mobile Trailer from the Partnership at a contract price of $5,000. The cost to assemble the Teardrop Trailer from the Kit is a total of $4,995($3,000 for the Kit, $495 for the chassis, and $1,500 for the services of the independent contractor to assemble the Kit on the chassis.)
Our Teardrop Trailers will be approximately 4 feet (1.2 m) in width and 10 feet (3.0 m) in length and 5 feet (1.5 m) in height Wheels and tires are outside the body and are covered by fenders. Our Teardrop Trailers will be covered with thin sheets of aluminum. Since Teardrop Trailers are relatively light, most vehicles can tow a Teardrop Trailer and have little effect on the vehicle's fuel consumption. We do not intend to lease our Teardrop Trailers for camping or recreational use. However, our trailers will be configured in a camping trailer configuration so as to enhance the residual value of the trailer. We believe that some of our future rental customers, who will rent our trailers for longer periods, may use the interior space for their personnel's comfort or for storage.
Our trailers will be assembled upon a chassis that has tail lights, wiring, fenders, wheels and a trailer hitch that is compliant with Federal and State regulations. We have no formal relationship with any trailer chassis manufacturer, but we believe that many manufacturers will continue to offer a chassis that we will utilize in our trailers. In the event that chassis become unavailable, our business would be adversely affected as we would then have to adjust our designs to fit chassis available from other sources.
Marketing
We intend to market our advertising and design services through our website www.tdropmobile.com. We have hired an independent web-site developer to develop our website, which is active. We also are active with social media with both Facebook and Twitter. . In addition, we intend to offer our mobile billboard advertising services through traditional marketing channels, such as trade journals, trade catalogues, yellow pages advertising, and through the personal contacts of our Management. Marketing of our mobile billboard advertising has already commenced as we have made several proposals to motor sports events and advertisers to use our services. We also market our consulting services through personal contacts of our officers and majority shareholder.
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We have chosen the unique shape and look of a Teardrop Trailer as our advertising platform as we believe its "eye appeal" will be attractive to a target audience's view and retention of the adverting images which will appear on the Teardrop Trailer.
In May of 2014, we acquired two fully restored "Classic" vehicles with the intention that these vehicles be used to tow our Teardrop trailers and to be used as marketing vehicles for our business. We acquired a 1959 Chevrolet Apache Fleetside pick-up truck (the "Apache") and a 1979 Ford Ranchero. On September 1, 2014, we returned the Apache to the seller and the consideration (333,333 of our shares valued at $50,000) was returned to us. The Ranchero vehicle will be available to be leased as a tow vehicle with our Teardrop trailers or it can be leased independently from the trailers. We believe that the use of this vehicle in conjunction with a Teardrop Trailer, will enhance the attractiveness of our advertising offerings to potential lessees.
We intend to offer advertising space on our trailers. Advertisement will be installed by applying decals, large vinyl sheets as decals or by fastening one large sheet of vinyl to the sides and top of the trailer. In addition, we will offer to provide our tow vehicle and a driver.
We believe that the mobile billboard outdoor advertising will offer to advertisers:
| · | Event Marketing | |
| · | New Product Launches | |
| · | Retail Store Openings | |
| · | Grand Openings | |
| · | Tradeshow Advertising | |
| · | Political Advertising and Campaigning | |
| · | Publicity | |
| · | Concerts | |
| · | Sporting Events | |
| · | Conventions | |
| · | Trade Shows | |
| · | Outdoor Festivals | |
| · | Beach Cities and Events | |
| · | Grand Openings | |
| · | Holiday Events | |
| · | Motion Picture Premiers |
We believe that mobile billboard outdoor advertising offers certain advantages to advertisers, among which include:
| · | Mobile trailers are flexible providing one with a wide variety of space and cost options, which can be used for anything from short sales promotions to being part of a long-term brand awareness campaign. | |
| · | Instead of hoping people see an advertisement, the advertisements are brought to them. | |
| · | They are more cost effective than other forms of advertising. | |
| · | We can park the trailer in front of a business or a competitor's. | |
| · | We can thoroughly saturate a specific area unlike regular billboards, radio, TV or direct mail. | |
| · | We can provide specific demographic routes so that there are multiple exposures. | |
| · | Mobile billboards create impact because of their movement, size and prominence on the road and can go where other advertising can’t. They merely have to be visible to attract attention. | |
| · | We can provide advertisements in the middle of all the activity at a special event like a tournament, fair, tradeshow, sporting event et. al. | |
| · | As they are eye-level with consumers, the message is communicated directly, increasing the impact of the product. |
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We will also offer to work closely with our clients to fully understand the client's marketing objectives. We will used our best efforts to identify the highest profile locations in our client's target market in order to provide the most efficient, high exposure, high impact and cost-effective mobile billboard advertising campaign.
At every stage of the process, our services will include design, branding and selection of graphics, to achieve maximum results. Audio, illumination, promotional sampling and other sensory elements can be added to further enhance an advertising message.
Our rates will be negotiated at time of agreement with our client. Our rates will be based upon the range of services, length of the advertising contract, number of vehicles used, miles traveled, length of campaign, ancillary costs and other variables. Generally, we anticipate our rates to be $995 for the design and application, and removal of graphics to a trailer; $295 per day for the use of the trailer; $175 per day for a tow vehicle and driver, based upon a 6 hour day. There will be a 3 day minimum for each trailer rental.
Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014
Revenues
The Company recognized no revenue during the three months ended June 30, 2015 or for the same period ended June 30, 2014.
Operating Expenses
For the three months ended June 30, 2015 operating expenses were $18,951 compared to $30,170 for the same period in 2014 for a decrease of $11,219. The decrease was primarily a result of the decrease in general and administrative expenses, $10,500 of which was due to the termination of a consultant agreement for $3,500 per month. The consulting agreement was terminated to reduce the expenses of the Company.
Interest and Financing Costs
Interest expense was $11,219 for the three months ended June 30, 2015 compared to $0 in the three months ended June 30, 2014 as the Company had no borrowings outstanding during the three months ended March 31, 2014.
Net Income (Loss)
The Company incurred losses of $30,170 in the three months ended June 30, 2015 compared to $30,170 during the three months ended June 30, 2014 due to the factors discussed above.
Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014
Revenues
The Company recognized no revenue during the six months ended June 30, 2015 and no revenue for the six months ended June 30, 2014.
Operating Expenses
For the six months ended June 30, 2015 operating expenses were $112,026 compared to $222,304 for the same period in 2014 for a decrease of $110,278. The decrease was a result of a decrease in consulting and related party expenses which decreased to $44,889 from $139,087 for a difference of $94,198. Consulting expenses decreased to $13,000 from $29,103 for a decrease of $16,103. In addition, general and administrative expenses decreased to $18,874 from $29,114 for a decrease of $10,240. The consulting agreement and related party expenses were terminated to reduce the expenses of the Company. These decreases were offset by an increase in professional fees which went up to $35,263 from $25,000 for an increase of $10,263.
Interest and Financing Costs
Interest expense was $21,626 for the six months ended June 30, 2015 compared to $0 in the six months ended June 30, 2014 as the Company had no borrowings outstanding during the six months ended June 30, 2014,
Net Income (Loss)
The Company incurred losses of $133,662 in the six months ended June 30, 2015 compared to $222,304 during the six months ended June 30, 2014 due to the factors discussed above.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company has a minimum cash balance available for payment of ongoing operating expenses and has incurred losses since inception and anticipates future losses in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. . Its continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company.
The Company had $99 in cash at June 30, 2015 with availability on our related party line of credit with General Pacific Partners, LLC of $441,000. We had a working capital deficit of $481,277. As of December 31, 2014, the Company had cash of $27,125 with a working capital deficit of $348,615.
Operating activities
During the six months ended June 30, 2015, we used $110,026 in operating activities compared to $219,596 during the six months ended June 30, 2014, a decrease of $109,570. The decrease between the two periods was largely due to a $88,642 reduction in losses and a $21,636 increase in accrued interest during the three months ended June 30, 2015.
Investing activities
We neither generated nor used cash flow in investing activities during the three months ended June 30, 2015 compared to cash used of $65,000 for the same period in 2014 relating to the purchase of fixed assets.
Financing activities
During the six months ended June 30, 2015, we generated $83,000 from financing activities compared to $239,500 during the six months ended June 30, 2014, a decrease of $155,600. During the six months ended June 30, 2015, we received $84,000 by way of line of credit from related party and repaid $1,000 to a former investor in the Company. By comparison, during the six months ended June 30, 2014, we received $75,000 by way of loan from related party, $75,000 proceeds from a related party and $89,500 proceeds from sale of stock.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company,” we are not required to provide the information under this Item 3.
ITEM 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer/Chief Financial Officer has concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.
(b) Changes in internal controls. There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. Legal Proceedings
We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or material pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the six months ended June 30, 2015, there were no sale of shares of the Company's common stock.
ITEM 3. Default Upon Senior Securities
During the six months ended June 30, 2015, the Company had no senior securities issued and outstanding.
ITEM 4. Mine Safety Disclosures
Not applicable to our Company.
ITEM 5. Other Information
None.
ITEM 6. Exhibits
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K
| SEC Ref. No. | Title of Document | |
| 31.1* | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of the Principal Executive Officer pursuant to U.S.C. pursuant to Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification of the Principal Financial Officer pursuant to U.S.C. pursuant to Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | XBRL Instance Document | |
| 101.SCH* | XBRL Schema Document | |
| 101.CAL* | XBRL Calculation Linkbase Document | |
| 101.DEF* | XBRL Definition Linkbase Document | |
| 101.LAB* | XBRL Label Linkbase Document | |
| 101.PRE* | XBRL Presentation Linkbase Document |
| * | Filed herewith. |
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SIGNATURES
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, thereunto duly authorized.
THE TEARDROPPERS, INC.
August 19, 2015
By: /s/ Raymond Gerrity
Raymond Gerrity
Chief Executive Officer
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