Table of Contents
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 September 30, 2018
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.) |
180 Newport Center Dr. Ste. 230
Newport Beach, Ca. 92660
(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 every Interactive Data File required to be submitted 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 such files). Yesx Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
| | Large accelerated filer o | Accelerated filer o |
| | Non-accelerated filer o | Smaller reporting company x |
| | Emerging growth company o | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Nox
There were 45,905,000 shares of the registrant’s common stock, $0.001 par value per share, outstanding on November 1, 2018.
THE TEARDROPPERS, INC.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
ITEM 1. Condensed Unaudited Financial Statements
The Teardroppers, Inc.
CONDENSED BALANCE SHEETS
(UNAUDITED)
| | | September 30, | | | December 31, | |
| | | 2018 | | | 2017 | |
| | | | | | | |
| ASSETS | | | | | | |
| | | | | | | |
| Current assets | | | | | | | | |
| Cash | | $ | 48,161 | | | $ | 40,027 | |
| Prepaid expenses | | | 6,576 | | | | – | |
| Total current assets | | | 54,737 | | | | 40,027 | |
| | | | | | | | | |
| Property and equipment: | | | | | | | | |
| Cost | | | 258,000 | | | | 254,000 | |
| Less accumulated depreciation | | | (58,225 | ) | | | (24,858 | ) |
| Property and equipment, net | | | 199,775 | | | | 229,142 | |
| | | | | | | | | |
| Total Assets | | $ | 254,512 | | | $ | 269,169 | |
| | | | | | | | | |
| | | | | | | | | |
| LIABILITIES & STOCKHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| Current liabilities | | | | | | | | |
| | | | | | | | | |
| Accounts payable | | $ | 182,099 | | | $ | 139,987 | |
| Accounts payable - related parties | | | 258,355 | | | | 234,885 | |
| Customer deposits | | | 14,500 | | | | 14,500 | |
| Deferred revenue | | | 16,000 | | | | – | |
| Current portion of long term debt | | | 27,467 | | | | 21,134 | |
| Loans payable | | | – | | | | 450,000 | |
| Accrued interest - unrelated parties | | | 145,632 | | | | 139,250 | |
| Line of credit from related party | | | 142,220 | | | | 49,750 | |
| Accrued interest payable-related parties | | | 15,925 | | | | 13,399 | |
| Total current liabilities | | | 802,198 | | | | 1,062,905 | |
| | | | | | | | | |
| Long-term liabilities(net of current portion $27,467) | | | 122,962 | | | | 143,866 | |
| | | | | | | | | |
| Total Liabilities | | | 925,160 | | | | 1,206,771 | |
| | | | | | | | | |
| Stockholders' Deficit | | | | | | | | |
| Preferred stock, par value $0.001, authorized 20,000,000 shares, issued shares and outstanding: 0 shares, respectively | | | – | | | | – | |
| Common stock, par value $0.001, authorized 200,000,000 shares issued 45,905,000 and 41,550,000 shares, respectively | | | 45,905 | | | | 41,550 | |
| Additional paid in capital | | | 813,573 | | | | 283,728 | |
| Accumulated deficit | | | (1,530,126 | ) | | | (1,262,880 | ) |
| Total Stockholders' Deficit | | | (670,648 | ) | | | (937,602 | ) |
| | | | | | | | | |
| Total Liabilities and Stockholders' Deficit | | $ | 254,512 | | | $ | 269,169 | |
The accompanying notes are an integral part of the financial statements.
The Teardroppers, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| | | Three Months Ended | | | Nine Months Ended | | |
| | | September 30, | | | September 30, | | | September 30, | | | September 30, | | |
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | |
| | | | | | | | | | | | | | |
| Revenues | | $ | 12,000 | | | $ | – | | | $ | 28,000 | | | $ | – | | |
| Total revenue | | | 12,000 | | | | – | | | | 28,000 | | | | – | | |
| | | | | | | | | | | | | | | | | | |
| Cost of sales | | | – | | | | – | | | | – | | | | – | | |
| Gross margin | | | 12,000 | | | | – | | | | 28,000 | | | | – | | |
| | | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | | |
| Consulting to related parties | | | 40,000 | | | | 25,000 | | | | 90,500 | | | | 77,500 | | |
| General and administrative | | | 53,303 | | | | 26,873 | | | | 149,420 | | | | 66,096 | | |
| Professional fees | | | 3,675 | | | | 3,675 | | | | 27,195 | | | | 21,279 | | |
| | | | 96,978 | | | | 55,548 | | | | 267,115 | | | | 164,875 | | |
| | | | | | | | | | | | | | | | | | |
| Operating income (loss) | | | (84,978 | ) | | | (55,548 | ) | | | (239,115 | ) | | | (164,875 | ) | |
| | | | | | | | | | | | | | | | | | |
| Other income (expense): | | | | | | | | | | | | | | | | | |
| Interest expense - related parties | | | (6,401 | ) | | | (269 | ) | | | (11,869 | ) | | | (4,795 | ) | |
| Interest expense - unrelated parties | | | – | | | | (11,250 | ) | | | (16,262 | ) | | | (33,750 | ) | |
| | | | (6,401 | ) | | | (11,519 | ) | | | (28,131 | ) | | | (38,545 | ) | |
| | | | | | | | | | | | | | | | | | |
| Net loss before taxes | | | (91,379 | ) | | | (67,067 | ) | | | (267,246 | ) | | | (203,420 | ) | |
| | | | | | | | | | | | | | | | | | |
| Income Tax Provision | | | – | | | | – | | | | – | | | | – | | |
| | | | | | | | | | | | | | | | | | |
| Net loss | | $ | (91,379 | ) | | $ | (67,067 | ) | | | (267,246 | ) | | | (203,420 | ) | |
| | | | | | | | | | | | | | | | | | |
| Net loss per share | | | | | | | | | | | | | | | | | |
| (Basic and fully diluted) | | $ | (0.00 | ) | * | $ | (0.00 | ) | * | $ | (0.01 | ) | | $ | (0.01 | ) | |
| | | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding | | | 45,856,923 | | | | 41,368,478 | | | | 45,667,143 | | | | 39,132,637 | | |
* denotes a loss of less than $(.01) per share.
The accompanying notes are an integral part of the condensed financial statements.
The Teardroppers, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2018 | | | 2017 | |
| | | | | | | |
| Cash Flows From Operating Activities: | | | | | | | | |
| Net income (loss) | | $ | (267,246 | ) | | $ | (203,420 | ) |
| | | | | | | | | |
| Adjustments to reconcile net loss to net cash used for operating activities | | | | | | | | |
| Depreciation | | | 38,567 | | | | 9,950 | |
| | | | | | | | | |
| Changes in Operating Assets and Liabilities | | | | | | | | |
| Increase in prepaid expenses | | | (6,576 | ) | | | – | |
| Increase in accounts payable - unrelated parties | | | 42,112 | | | | 32,613 | |
| Increase in accounts payable - related parties | | | 23,470 | | | | 77,500 | |
| Increase in deferred revenue | | | 16,000 | | | | – | |
| Increase in accrued interest - related parties | | | 2,526 | | | | 4,795 | |
| Increase in accrued interest - unrelated parties | | | 6,382 | | | | 33,750 | |
| | | | | | | | | |
| Net cash used for operating activities | | | (144,765 | ) | | | (44,812 | ) |
| . | | | | | | | | |
| Cash Flows From Investing Activities: | | | – | | | | – | |
| | | | | | | | | |
| Cash Flows From Financing Activities: | | | | | | | | |
| Proceeds from line of credit to related party | | | 278,000 | | | | 196,825 | |
| Proceeds from line of credit to unrelated party | | | 75,000 | | | | – | |
| Repayments on line of credit to unrelated party | | | (8,202 | ) | | | – | |
| Repayments on line of credit to related party | | | (191,899 | ) | | | (153,000 | ) |
| | | | | | | | | |
| Net cash provided by financing activities | | | 152,899 | | | | 43,825 | |
| | | | | | | | | |
| Net Increase (Decrease) In Cash | | | 8,134 | | | | (987 | ) |
| | | | | | | | | |
| Cash At The Beginning Of The Period | | | 40,027 | | | | 48,386 | |
| | | | | | | | | |
| Cash At The End Of The Period | | $ | 48,161 | | | $ | 47,649 | |
| | | | | | | | | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | | | | | |
| | | | | | | | | |
| Non-cash investing and financing activities: | | | | | | | | |
| Assets acquired in exchange for stock | | $ | 28,000 | | | $ | 84,000 | |
| Debt converted to stock | | $ | 525,000 | | | $ | 167,000 | |
| Asset sold for cancellation of stock | | $ | (18,800 | ) | | $ | – | |
| | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest | | $ | 19,223 | | | $ | – | |
| Franchise and income tax | | $ | – | | | $ | – | |
The accompanying notes are an integral part of the condensed financial statements.
TEARDROPPERS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
For the Three and Nine Months Periods Ended September 30, 2018 and 2017
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
On June 3, 2013, Teardroppers, Inc. (the “Company”), was incorporated under the laws of the state of Nevada.
We are in the business of mobile billboard advertising, providing 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 nine months ended September 30, 2018 are not necessarily indicative of the final results that may be expected for the year ended December 31, 2018. 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, 2017 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.
Revenue recognition
On January 1, 2018, the Company adopted the provisions of ASC 606 Revenue from Contracts with Customers, and related Accounting Standards Updates. Implementation had no impact on prior periods and the Company does not believe implementation will have a significant impact on amounts reported in the current or future financial statements.
The primary source of revenue is from the rental of advertising space on custom designed Teardrop Trailers. The length of the rental agreements varies from one to thirty days. Customers pay in advance and revenue is recognized based on the number of days of each contract that have expired. For the three and nine months ended September 30, 2018 and 2017, the Company recognized no income from the rental of the trailers.
In March 2018, the Company entered into a four-year agreement to lease equipment to an unrelated third party. As of September 30, 2018, $28,000 of lease income has been recognized.
Recently issued accounting pronouncements
The Company has implemented all new accounting pronouncements that are in effect and applicable to the Company. 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 consolidated 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 – LINE OF CREDIT FROM RELATED PARTY
During 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, 2018 bearing interest of 10% per annum. The maturity date was extended to June 1, 2021. DEVCAP Partners, LLC is a related party to the Company as it is the majority shareholder of the Company. As of September 30, 2018, and December 31, 2017, the balance of the line of credit was $67,220 and $49,750, respectively. The Company recorded accrued interest of $9,693 and $8,667 on the line of credit at September 30, 2018 and December 31, 2017, respectively.
During 2015, the company entered into a line of credit with General Pacific Partners, LLC, a California limited liability company, for an amount up to $450,000. The line of credit is a demand loan bearing interest of 10% per annum. General Pacific Partners, LLC is a related party to the Company as it is owned by a majority shareholder of the Company. As of September 30, 2018, and December 31, 2017 the balance of the line of credit was $0. The Company recorded accrued interest of $4,732 at September 30, 2018 and December 31, 2017.
During 2014, the Company entered into a line of credit agreement with Gemini Southern, LLC. On April 1, 2018, the Company converted $525,000 of debt owed to Gemini Southern, LLC into 4,375,000 shares of stock. Gemini Southern, LLC will be treated as a related party for all activity from the date of the conversion forward. See Notes 6 and 8 for more information on the conversion. The line of credit is a demand loan with a maximum of $450,000 bearing interest at 10%, maturing December 2019. As of September 30, 2018, the balance due on the line was $75,000. The Company recorded $1,500 accrued interest at September 30, 2018.
On October 1, 2017, the company acquired from Gemini Southern, LLC a 2006 Ultra-Comp 53” NASCAR type vehicle transport hauler (the “Hauler”) to be used for promotional / advertising services. The purchase price of the Hauler was $165,000. The Company paid for the Hauler with a promissory note (the “Hauler Note”). The Hauler Note bears interest at 12% per annum and is payable as follows: (i) interest only from October 1, 2017 through February 28, 2018; (ii) $ $3,670 per month from March 1, 2018 through February 1, 2022; and $45,000 on February 28, 2022. The trailer is collateral for the promissory note. The balance of the loan was $150,429 and $165,000 as of September 30, 2018 and December 31, 2017, respectively. There was no accrued interest at September 30, 2018 and December 31, 2017, respectively.
Principal payments for the next five years will be as follows:
| 2018 | | $ | 21,134 | |
| 2019 | | | 28,299 | |
| 2020 | | | 31,888 | |
| 2021 | | | 35,932 | |
| 2022 | | | 47,747 | |
| Total | | $ | 165,000 | |
By virtue of the conversion of the loan to stock described above, Gemini Southern, LLC will be treated as a related party for all transactions after April 1, 2018. See Note 8 below for information on related party transactions.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consists of the following at September 30, 2018 and December 31, 2017:
| | | September 30,
2018 | | | December 31,
2017 | |
| Property and equipment | | $ | 258,000 | | | $ | 254,000 | |
| Less: accumulated depreciation | | | (58,225 | ) | | | (24,858 | ) |
| Property and equipment, net | | $ | 199,775 | | | $ | 229,142 | |
Depreciation expense for the nine months ended September 30, 2018 and the year ended December 31, 2017 was $38,567 and $22,650 respectively.
NOTE 6 – LOAN PAYABLE
During 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. 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, 2018. On April 1, 2018, the balance of the debt, $525,000, was converted into 4,375,000 of common stock. See note 8 for a complete description of the transaction. As of September 30, 2018, and December 31, 2017, the loan amount was $0 and $450,000, respectively. The Company recorded accrued interest on this loan of $145,632 and $134,300 as of September 30, 2018 and December 31, 2017, respectively. The accrued interest was not part of the conversion agreement and continues to be reflected as a liability. Effective April 1, 2018, the line of credit is considered related party debt. See Note 4 for details of related party transactions.
NOTE 7 – OTHER RELATED PARTY TRANSACTIONS
Office space
We currently occupy approximately 800 square feet of office space at 180 Newport Center Drive Suite 230 Newport Beach, California. We share this space with related party DEVCAP Partners, LLC. Presently, we do not incur any expenses for the use of this facility.
Line of credit from related party
The Company has three lines of credit agreements with related parties. The sole owner of DEVCAP Partners, LLC is also the majority shareholder in the Company. General Pacific Partners is owned by the party that owns DEVCAP Partners, LLC. In April 2018, Gemini Southern, LLC became a related party when their effective stock ownership exceeded 10%. See Note 4 for further disclosure.
Consulting expense to related party (DEVCAP Partners, LLC)
During 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. On January 1, 2018 the agreement with DEVCAP Partners, LLC was extended through December 31, 2019. For the nine months ended September 30, 2018 and 2017, the Company recorded consulting fee expense to DEVCAP of $67,500. The amount due but unpaid is $208,355 and $187,385 at September 30, 2018 and December 31, 2017, respectively, and is included in accounts payable- related parties on the balance sheet.
Consulting expense to related party (Ray Gerrity)
During 2014, the Company entered into a verbal consulting agreement with its former Chief Executive Officer, Ray Gerrity, whereby the Company agreed to pay $2,500 per quarter for consulting services related to his duties as Chief Executive Officer. For the nine months ended September 30, 2018 and 2017, the Company recorded consulting fee expense of $2,500 and $7,500, respectively. The amount due but unpaid was $32,500 and $30,000, at September 30, 2018 and December 31, 2017, respectively, and was included on the balance sheet as accounts payable - related parties. Ray Gerrity resigned his position effective March 31, 2018.
Related party purchase of asset
On March 1, 2018, the Company purchased a 2013 Ford F-150 truck from a related party for use in the business operations at a cost of $28,000. The vehicle was acquired from the father of the majority shareholder. The debt was immediately converted into 140,000 shares of common stock valued at $.20 per share.
Sale of asset to related party
On February 22, 2018, the Company sold a 1971 Corvette LS5 T-top car to DEVCAP Partners, LLC in exchange for cancellation of 160,000 shares of stock. The cancellation of the shares was valued at the net book value of the vehicle, $18,800.
Conversion of debt to stock
On April 1, 2018, the Company converted $525,000 of debt owed to Gemini Southern, LLC to stock at a value of $.12 per share, issuing 4,375,000 shares. The stock issued was restricted stock. Gemini Southern cannot sell, pledge or transfer the shares for one year from the date of the conversion.
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 its authorized shares to 200,000,000 shares of common stock and 20,000,000 shares of preferred stock, both $0.001 par value.
On February 22, 2018, the Company sold a 1971 Corvette in exchange for the cancellation of 160,000 shares of stock.
On March 1, 2018, the Company converted $28,000 of related party accounts payable into 140,000 shares of stock at $.20 per share.
On April 1, 2018, Gemini Southern, LLC was converted to a loan payable to them into stock at $.12 per share. The loan amount was $525,000 and converted into 4,375,000 shares of restricted common stock. Gemini Southern cannot sell, pledge or transfer the shares for one year from the date of the conversion.
NOTE 9 – SUBSEQUENT EVENTS
Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 and has determined that no material subsequent events exist.
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.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
Revenues
The Company had $12,000 in revenue during the three months ended September 30, 2018 compared to $0 in revenue during the three months ended September 30, 2017.
Operating Expenses
For the three months ended September 30, 2018 operating expenses were $96,978 compared to $55,548 for the same period in 2017 for an increase of $41,430. The increase was primarily a result of the increase in consulting fees to related parties to $40,000 from $25,000 and an increase in general and administrative to $53,303 compared to $26,873 for the same period in 2017.
Interest and Financing Costs
Interest expense was $6,401 for the three months ended September 30, 2018 compared to $11,519 for the three months ended September 30, 2017. The interest expense decreased due to a decrease in the indebtedness of the company.
Net Income (Loss)
The Company incurred losses of $91,379 for the three months ended September 30, 2018 compared to $67,067 during the three months ended September 30, 2017 due to the factors discussed above.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Revenues
The Company had $28,000 in revenue during the nine months ended September 30, 2018 compared to $0 in revenue during the nine months ended September 30, 2017.
Operating Expenses
For the nine months ended September 30, 2018 operating expenses were $267,115 compared to $164,875 for the same period in 2017 for an increase of $102,240. The increase was primarily a result of the increase in consulting fees to related parties to $90,500 from $77,500 and an increase in general and administrative fees to $149,420 compared to $66,096 for the same period in 2017.
Interest and Financing Costs
Interest expense was $28,131 for the nine months ended September 30, 2018 compared to $38,545 for the nine months ended June 30, 2017. The interest expense decreased for the period due to a decrease in the indebtedness for the company.
Net Income (Loss)
The Company incurred losses of $267,246 for the nine months ended September 30, 2018 compared to $203,420 during the nine months ended September 30, 2017 due to the factors discussed above.
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 $48,161 in cash at September 30, 2018 with availability on our related party lines of credit with DEVCAP Partners, LLC of $382,780, General Pacific Partners, LLC of $450,000, and Gemini Southern, LLC of $375,000. As of September 30, 2018 we had a working capital deficit of $747,461.
Operating activities
During the nine months ended September 30, 2018, we had ($144,765) in operating activities compared to ($44,812) during the nine months ended September 30, 2017, an increase in cash outflows of $99,953. The change was primarily due to a decrease in accounts payable of $44,531, a decrease in accrued interest of $29,637 and an increase in prepaid expenses of $6,576.
Investing activities
We neither generated nor used cash flow in investing activities during the nine months ended September 30, 2018 and the same for the period in 2017.
Financing activities
During the nine months ended September 30, 2018, we generated $152,899 from financing activities compared to $43,834 for the same period ended September 30, 2017. The increase was primarily due to proceeds received from an related party line of credit.
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
Management evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of September 30, 2018, the end of the fiscal period covered by this Quarterly Report on Form 10-Q. SEC rules define the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in its reports filed under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management, including the Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2018 to ensure that the information required to be disclosed in the reports filed or submitted by us under the Exchange Act was recorded, processed, summarized and reported within the requisite time periods and that such information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.
No changes in our internal control over financial reporting occurred during the period ended September 30., 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 nine months ended September 30, 2017, the Company issued 160,000 shares of common stock to purchase a vehicle for use in operations.
During the nine months ended September 30, 2017, we acquired a 1995 Featherlite enclosed fifty-three (53) foot spread axle trailer that we intend to use with our mobile advertising business. The company issued 300,000 shares of its common stock to purchase the trailer. The cost basis of the shares issued was $.20 twenty cents per share.
During the nine months ended September 30, 2017, we converted related party debt of $167,000 into 3,340,000 shares of common stock at a value of $.05 per share.
During the nine months ended September 30, 2018, we sold a vehicle in exchange for the cancellation of 160,000 shares of common stock at a value of $.20 per share.
During the nine months ended September 30, 2018, we issued 140,000 shares of common stock at a value of $.20 per share to purchase a vehicle for use in operations.
During the nine months ended September 30, 2018, we converted $525,000 of debt into 4,375,000 shares of common stock at a value of $.12 per share.
ITEM 3. Default Upon Senior Securities
During the nine months ended September 30, 2018, the Company had no senior securities issued and outstanding.
ITEM 4. Mine Safety Disclosures
Not applicable to our Company.
ITEM 5. Other Information
On September 25, 2018, Larry Krogh resigned as the Chief Executive Officer, President and Chief Financial Officer of the Company. Mr. Krogh remains as the sole director of the Company. On September 25, 2018, Cody S. Ware was appointed as the Chief Executive Officer, President and Chief Financial Officer of the Company.
Mr. Ware, age 24, has been involved in professional motorsports from 2012 through present day, both as a driver and as an independent businessman. He has engaged in transactions with consumer based products and services, that were involved in the marketing of professional motorsports. He was also employed by Rick Ware Racing, a twenty-five year old multi series motorsports racing organization, which is focused on the NASCAR Monster Energy Cup Series. Mr. Ware has participated in several top tiers of motorsports including the IMSA sports car series and Monster Trucks. As a professional driver Mr. Ware has secured sponsorship from multiple national companies such as RaceTrac gas stations and Bubba Burger. From January 1, 2018 through October 31, 2018, Mr. Ware expanded his professional racing resume by driving in all the top three series of NASCAR events, including the highest level, NASCAR Monster Energy Cup Series, in races at various super speedway race venues and road courses.
Mr. Ware attended La Sierra University in Riverside, California and has experience working for several international car companies such as BMW and Lamborghini as a consultant for their on-track driving & instruction performance schools. He will devote approximately 20 % of his time to the business of the Company. Pursuant to an oral employment agreement, Mr. Ware will be paid $1,500 per month commencing November 1, 2018
ITEM 6. Exhibits
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K
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.
November 14, 2018
By:/s/ Cody Ware
Cody Ware
Chief Executive Officer
