UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
xQuarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
For the quarterly period ended June 30, 2017
¨Transition Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
For the transition period ________ to ________
COMMISSION FILE NUMBER333-204518
DD’S DELUXE ROD HOLDER, INC.
(Exact name of the registrant business issuer as specified in its charter)
NEVADA | 61-1748028 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
Unit 171-2A-15 Worobetz Place Saskatoon, SK (Address of principal executive office) | S7L6R4 (Postal Code) |
(306) 716-5372 (Issuer's telephone number) | |
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] No [ ]
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “Accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer [ ]
Accelerated Filer [ ]
Non-Accelerated Filer [ ]
Smaller Reporting Company [x]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
As of July 19, 2017,there were4,000,000shares of issuer’s common stock outstanding.
1
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS (UNAUDITED)
BALANCE SHEETS AT JUNE 30, 2017 AND DECEMBER 31, 2016
STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND JUNE 30, 2016
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND JUNE 30, 2016
NOTES TO THE FINANCIAL STATEMENTS
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4.
CONTROLS AND PROCEDURES
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS.
ITEM 1A.
RISK FACTORS.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3.
DEFAULTS ON SENIOR SECURITIES
ITEM 4.
MINE SAFETY DISCLOSURES
ITEM 5.
OTHER INFORMATION
ITEM 6.
EXHIBITS
SIGNATURES
2
PART I - FINANCIAL INFORMATION
Item 1 – Financial Statements
DD’S DELUXE ROD HOLDER, INC.
BALANCE SHEETS (Unaudited)
|
|
|
| ||
| June 30, 2017 |
| December 31, 2016 | ||
ASSETS |
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
Cash and cash equivalents | $ | 1,177 |
| $ | 10,892 |
TOTAL CURRENT ASSETS |
| 1,177 |
|
| 10,892 |
INTANGIBLE ASSETS |
| 1,860 |
|
| 1,860 |
TOTAL ASSETS | $ | 3,037 |
| $ | 12,752 |
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
Line of credit | $ | 30,449 |
| $ | 30,449 |
Accounts payable |
| 1,800 |
|
| - |
Legal fees payable |
| 49,450 |
|
| 37,403 |
Accrued interest payable |
| 2,832 |
|
| 2,021 |
TOTAL CURRENT LIABILITIES |
| 84,531 |
|
| 69,873 |
TOTAL LIABILITIES |
| 84,531 |
|
| 69,873 |
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
Preferred Stock, $.001 par value; 20,000,000 shares authorized, none issued and outstanding |
|
|
|
| - |
Common Stock, $.001 par value; 100,000,000 shares authorized; 4,000,000 shares issued and outstanding |
| 4,000 |
|
| 4,000 |
Additional paid-in capital |
| 36,000 |
|
| 36,000 |
Accumulated deficit |
| (121,494) |
|
| (97,121) |
TOTAL STOCKHOLDERS’ DEFICIT |
| (81,494) |
|
| (57,121) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 3,037 |
| $ | 12,752 |
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
3
DD’S DELUXE ROD HOLDER, INC.
STATEMENTS OF OPERATIONS (Unaudited)
| For the three months ended |
| For the six months ended | ||||||||
| June 30, |
| June 30, | ||||||||
| 2017 |
| 2016 |
| 2017 |
| 2016 | ||||
OPERATING EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
Legal and professional | $ | 7,575 |
| $ | 11,536 |
| $ | 12,468 |
| $ | 19,541 |
Accounting and audit |
| 2,600 |
|
| 9,100 |
|
| 9,825 |
|
| 10,100 |
Transfer agent and public company |
| 600 |
|
| - |
|
| 1,225 |
|
| 1,778 |
General and administrative |
| 45 |
|
| 675 |
|
| 45 |
|
| 2,535 |
TOTAL OPERATING EXPENSE |
| 10,820 |
|
| 21,311 |
|
| 23,563 |
|
| 33,954 |
LOSS FROM OPERATIONS |
| (10,820) |
|
| (21,311) |
|
| (23,563) |
|
| (33,954) |
OTHER EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
| (410) |
|
| (363) |
|
| (810) |
|
| (1,215) |
TOTAL OTHER EXPENSE |
| (410) |
|
| (363) |
|
| (810) |
|
| (1,215) |
NET LOSS | $ | (11,230) |
| $ | (21,674) |
| $ | (24,373) |
| $ | (35,169) |
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE - BASIC AND DILUTED | $ | Nil |
|
| (0.01) |
| $ | (0.01) |
| $ | (0.01) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 4,000,000 |
| 4,000,000 |
| 4,000,000 |
| 3,340,659 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
4
DD’S DELUXE ROD HOLDER, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
| For the six months ended June 30, | ||||
| 2017 |
| 2016 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
Net loss | $ | (24,373) |
| $ | (35,169) |
Changes in operating assets and liabilities |
|
|
|
|
|
Prepaid expenses |
| - |
|
| (900) |
Accounts payable |
| 1,800 |
|
| - |
Legal fees payable |
| 12,047 |
|
| 13,931 |
Accrued interest payable |
| 811 |
|
| - |
Advances payable |
| - |
|
| 8,298 |
Net cash used in operating activities |
| (9,715) |
|
| (13,840) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
Borrowings under line of credit |
| - |
|
| 2,340 |
Proceeds from sale of common stock |
| - |
|
| 30,000 |
Net cash provided by financing activities |
| - |
|
| 32,340 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
| (9,715) |
|
| 18,500 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
| 10,892 |
|
| - |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 1,177 |
| $ | 18,500 |
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
Advances payable paid by line of credit | $ | - |
| $ | 28,286 |
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
5
NOTE 1 - NATURE OF OPERATIONS
DD’s Deluxe Rod Holder, Inc. (“Deluxe” or the “Company”) was incorporated on September 26, 2014 under the laws of the State of Nevada. The business purpose of the Company is to sell, through its website, Deluxerodholder.com, a fishing rod holder primarily for use in the sport of ice fishing. The Company has selected December 31 as its fiscal year end.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States.
In the opinion of management, the accompanying unaudited interim balance sheets and statements of operations and cash flows contain all adjustments, consisting of normal recurring items, necessary to present fairly, in all material respects, the financial position of the Company as of June 30, 2017, and the results of its operations and its cash flows for the six months ended June 30, 2017 and 2016. The operating and financial results for the Company for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
Going Concern
As shown in the accompanying financial statements, the Company has incurred operating losses since inception. As of June 30, 2017, the Company has no financial resources with which to achieve its objectives and obtain profitability and positive cash flows. As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit of $121,494 and stockholders’ deficit of $81,494. The Company's working capital deficit is $83,354. Achievement of the Company's objectives will be dependent upon the ability to obtain additional financing, and generate revenue from current and planned business operations, and control costs. The Company is in the development stage and has generated no operating income. The Company plans to fund its future operations by joint venturing or obtaining additional financing from investors and/or lenders. However, there is no assurance that the Company will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists. The financial statements do not include adjustments relating to the recoverability of recorded assets nor the implications of associated bankruptcy costs should the Company be unable to continue as a going concern.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to valuation of deferred tax. Actual results could differ from these estimates and assumptions and could have a material effect on the Company’s reported financial position and results of operations.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents.
6
Intangible Assets
Intangible assets with definite lives are subject to amortization. At June 30, 2017, such intangible assets consist of fees paid to the United States Patent and Trademark Office on the filing of a non-provisional patent application which will be amortized on a straight-line basis over the patent life of 20 years, once approved. Intangible assets with definite lives are tested for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. These conditions may include an economic downturn, regulations, or a change in the assessment of future operations
Start-up Costs
In accordance with ASC 720-15-20,“Start-up Costs,”the Company expenses all costs incurred in connection with the start-up and organization of the Company.
Office Space and Labor
The Company’s sole Officer and Director will provide the labor required to execute the business plan and supply the necessary office space and facilities for the initial period of operations. The Company will recognize the fair value of services and office space provided by our sole Officer and Director as contributed capital in accordance with accounting principles generally accepted in the United States. From inception through June 30, 2017, the fair value of services and office space provided was estimated to be nil.
Fair Value Measures
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date. At June 30, 2017 and December 31, 2016, the Company had no assets or liabilities accounted for at fair value on a recurring or nonrecurring basis.
Loss Per Share
Basic Earnings Per Share ("EPS") is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options and warrants. The Company has no potentially dilutive securities such as options, warrants, or convertible bonds currently issued and outstanding. Consequently, basic and diluted earnings per share are the same, as shown in the Statement of Operations.
Income Taxes
The Company recognizes provision for income tax using the liability method. Deferred income tax liabilities or assets at the end of each period are determined using the tax rates expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Reclassifications
7
Certain reclassifications have been made to the 2016 financial statements in order to conform to the 2017 presentation. These reclassifications have no effect on net loss, total assets or accumulated deficit as previously reported.
New Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2015-17 Income Taxes - Balance Sheet Classification of Deferred Taxes (Topic 740). The update is designed to reduce complexity of reporting deferred income tax liabilities and assets into current and non-current amounts in a statement of financial position. ASU No. 2015-17 requires the presentation of deferred income taxes, changes to deferred tax liabilities and assets be classified as non-current in the statement of financial position. The update is effective for fiscal years beginning after December 15, 2016.
In March 2016, the FASB issued ASU No. 2016-09 Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The update simplifies the accounting for stock-based compensation, including income tax consequences and balance sheet and cash flow statement classification of awards. The update is effective for fiscal years beginning after December 15, 2016, with early adoption permitted.
In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted.
In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.
NOTE 3 – LINE OF CREDIT
On March 1, 2016, the Company entered into a short-term line of credit agreement with Crest Business Solutions, LLC (“Crest”). The agreement provides that Crest will provide the Company with up to $50,000 via the line of credit. All amounts borrowed by the Company pursuant to the line of credit will be due and payable (with accrued interest thereon) in one balloon payment on February 28, 2017. The Company had the option to extend the term of the line of credit for an additional year to February 28, 2018 which was exercised. Interest accrues on the principal amount borrowed pursuant to the line of credit at the rate of five percent per annum. Crest previously had made advances to the Company. As of March 1, 2016, advances payable of $28,286 were transferred into the line of credit.
Accrued interest payable at June 30, 2017 and December, 31 2016, was $2,832 and $2,021, respectively, and interest expense for the three and six month periods ended June 30 was $410 and $810, respectively for 2017, and $363 and $1,215, respectively for 2016.
8
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned exploration and development of its properties, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.
Any statement that expresses or involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates”, or “intends”, or states that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:
·
Risks related to the Company’s business being in the development stage;
·
Risks related to the Company being able to continue as a going concern;
·
Risks related to the Company’s management being residents of Canada;
·
Risks related to the Company being headquartered in Canada;
·
Risks related to the Company’s ability to obtain a non-provisional patent for its product design;
·
Risks related to the Company’s competitive disadvantages;
·
Risks related to the effects of climate change on the market for the Company’s proposed product;
·
Risks related to the possible dilution of the Company’s common stock from additional financing activities;
·
Risks related to potential conflicts of interest with the Company’s management;
·
Risks related to the Company’s shares of common stock;
This list is not exhaustive of the factors that may affect the Company’s forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections titled “Description of Business” and “Management’s Discussion and Analysis” of this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. DD’s Deluxe Rod Holder, Inc. disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law. The Company advises readers to carefully review the reports and documents filed from time to time with the Securities and Exchange Commission (the “SEC”), its Annual Reports on Form 10-K, reports on Form 10-Q and Current Reports on Form 8-K.
Corporate Background
DD’s Deluxe Rod Holder, Inc. (“Deluxe” or the “Company”) is a Nevada corporation formed on September 26, 2014. The Company intends to build its business by developing, marketing and selling a fishing rod holder for use primarily by ice-fisherman. On January 30, 2015, the Company filed a provisional patent application with the United States Patent and Trademark Office (“USPTO”). The Company’s original provisional patent application was
9
scheduled to expire on January 30, 2016. On January 28, 2016, the Company filed a new provisional patent application with the USPTO. On February 24, 2016, the Company converted the provisional patent application into a non-provisional by filing a non-provisional patent application, USPTO. The Company anticipates the entire process to acquire a non-provisional utility patent will take between 12-18 months.
Current Operations
The Company is a developmental stage company. The Company has conducted limited operations and have had no operating revenues. We have never declared bankruptcy, been in receivership, or involved in any legal action or proceedings. Since incorporating, we have not made any significant purchases or sales of assets, nor have we been involved in any mergers, acquisitions or consolidations.
Deluxe is building a business as a developer and seller of a fishing rod holder for use primarily for ice fishing. Although the fishing rod holder can be used any time of the year and on almost any solid, relatively flat surface (such as a dock during non-winter months), our primary target market is ice anglers. What we refer to as a fishing rod holder includes a platform base connected to a tube that holds the rod, a split key ring affixed to an eye bolt, a bent metal mechanism which we have described as the “fishing-rod-eyelet-catch,” an optional alarm bell, and a coarsely-threaded screw which enables the end-user to stabilize the unit and/or affix the base of the unit to ice, wood, foam, metal, and a range of other hard surfaces. When a fish is hooked, the fishing-rod-eyelet-catch releases from the flexed rod allowing the stored elastic energy in the flexed rod to expend, visually alerting the fisherman. The rod-holder will include a small metal bell and fisherman will have the option to attach it to the rod which will further alert the angler when a fish is hooked and the rod is released from the eyelet-catch. The eyelet-catch is a bendable metal rod which allows the fisherman to adjust the sensitivity of the catch system: a decrease in the angle of the eyelet-catch makes the system more sensitive, and an increase in the angle of the eyelet-catch makes it less sensitive. A more sensitive eyelet-catch will make it easier for small fish to disengage the eyelet-catch; and a less sensitive eyelet-catch will make it more difficult to disengage the fishing rod enabling only larger fish to do so.
Believing the design of our product is eligible for a utility patent, we have filed a non-provisional patent application with the USPTO. The Company self-filed the non-provisional patent application via the USPTO’s online electronic filing system. The filing date, February 24, 2016, establishes the “date” of invention and, if a utility patent is ultimately issued, precludes any opposing claims to the invention subsequent to that date. The USPTO will respond to the Company by either notifying the Company that its application is incomplete, or the application will be assigned internally within the USPTO to undergo the examination process. If the application is incomplete the USPTO will provide the Company with a list of deficiencies and the Company will be given an opportunity to correct those deficiencies. Once the application is complete and assigned to an examiner, the examiner will make an initial determination as to whether our proposed product is eligible for the issuance of a utility patent. If the examiner initially determines that our proposed product is not eligible to receive a utility patent, the examiner will issue a determination to that effect and explain to the Company the bases for the examiner’s determination. The Company will then have an opportunity to amend its application and/or respond to the examiner’s bases for its determination. If the examiner determines that our proposed product is eligible for patent protection then the examiner will issue a notice of allowance which will contain further instructions to complete the process to issue the utility patent covering our proposed product. If we are successful in obtaining a utility patent for our proposed product, that patent will grant us certain rights regarding the proposed product, including, but not necessarily limited to the rights to, for a period of at least twenty (20) years: exclude others from making, using, selling, offering for sale, importing, or otherwise utilizing, our proposed product without our specific consent. To date the Company has not received any communication from the USPTO regarding its non-provisional patent application. Because the Company has received no communication from the USPTO regarding its non-provisional patent application, the Company estimates it will take at least 18-24 months, from the date of filing, to obtain a non-provisional utility patent for our proposed product.
During the next twelve (12) months the Company will work toward identifying and engaging a manufacturer to produce our product and also identifying one or more sporting goods and/or angling equipment wholesaler and/or retailers with which to place our product for sale to the general public. We will not make any agreements with wholesalers, retailers, or manufacturers until we have achieved success in obtaining a non-provisional utility patent
10
for our proposed product. We will likely not place any orders with a manufacturer unless and until we have received advance orders of our product from wholesalers and/or retailers. We currently do not have any agreements with a manufacturer or with any wholesalers or product retailers. Because of the Company’s change in estimated time to receive a utility patent for its proposed product, we now foresee delivering product to retailers and/or wholesalers within the next thirty-six (36) months.
Upon, and only if, the Company obtains a non-provisional “utility” patent for its proposed product, and after we have sourced a manufacturer to make our proposed product, we will begin marketing our proposed product to wholesalers, retailers and the general public. Our marketing plan will include online search optimization, utilization of a Company website, production and dissemination of hard copy and electronic promotional materials and direct marketing efforts to retailers and wholesalers and trade show attendees.
We likely will not place any orders to manufacture our proposed product until we receive advanced sales orders from wholesalers and/or retailers. At this time, it is impossible to effectively market our product and to know how long it will take us to acquire enough advanced orders to engage in manufacturing our proposed product. However, our current plan envisions delivering product to wholesalers and/or retailers within thirty-six (36) months.
Our business plan calls for us to approach manufacturers, wholesalers and retailers with existing reputations for quality, customer service, ease of shopping experience and economic value. Because we are a development stage company, it will be important for us to work with others who have positive reputations in order to give consumers confidence in our product and business. We have identified companies which we believe have positive reputations, but currently do not have working relationships with any manufacturers, wholesalers or retailers. Because of the Company’s change in estimated time to receive a utility patent for its proposed product, we now intend to have working relationships with one or more parties to manufacture, wholesale, and/or retail our proposed product within 24 months.
We also intend to market our proposed product via our website and through other forms of direct marketing and distribution such as trade shows, infomercials and social media. Additionally, we intend our future website to contain an online shopping cart component to allow the purchase of our proposed product directly from us through our website. By self-filing our non-provisional patent application, we have conserved monetary resources that can be re-directed towards other endeavors, including building out our website. When fully built out, it is intended that our website will contain general information about the Company, its product(s) and operations, the ability to view and purchase our product(s) and information relevant to corporate governance and investor relations. The Company intends to have its website fully built out and operational by the time it begins placing manufacturing orders for its proposed product.
Competition
We are currently unaware of anyone manufacturing, marketing, supplying or selling any product similar to our deluxe fishing rod holder. Our limited research on the internet did not result in the identification of any companies currently manufacturing and/or supplying a fishing-rod holder similar to the one we have designed and intend to market and sell.
There are several companies that make and sell fishing rod holders, including fishing rod holders designed specifically for ice fishing; however, Deluxe has not yet identified a fishing rod holder currently being manufactured and/or sold by anyone else that will help set the hook into the fish’s mouth and trigger an alarm bell notifying the angler that a fish has been hooked. Our limited research has led us to believe that there are no products currently being offered similar to our proposed product. Although we have not identified a product similar to our design, our research has been limited and there could be a similar product, of which we are currently unaware, being marketed and/or sold.
We have not obtained any empirical evidence detailing the competitive market in the U.S. and Canada for a rod-holder such as the one we have designed, and we cannot determine competitive factors with any degree of certainty.
11
We plan on working with a supplier who already manufactures fishing products. We do not at this time have any agreements or contracts with a supplier or company that provides such products.
While we do not have empirical evidence to support our contentions, our limited research has led us to believe that competitive conditions are favorable. According to statistics by Statista.com, there appears to be correlations between Wildlife-related recreational expenditures in the U.S. in 2001, 2006, and 2011 (in the billion U.S. dollars), by category. In 2001, $48.97 billion was spent on Wildlife watching, $45.43 billion was spent on Fishing, and $26.28 billion was spent on Hunting. In 2006, $51.13 billion was spent on Wildlife watching, $47.05 billion was spent on Fishing, and $25.64 billion was spent on Hunting. In 2011, $54.96 billion was spent on Wildlife watching, $41.77 billion was spent on Fishing, and $33.26 billion was spent on Hunting. In all three categories from 2001 to 2006 there was a 2.5% increase in total sales. In the same categories from 2006 to 2011 there was a 5% increase in total sales. Although fishing sales dropped in 2011 to $41.77 billion from $47.05 billion in 2006, total sales of hunting increased to $33.26 billion from where it had dropped to in 2006. It is estimated that 90.1 million Americans or 38% of the population participated in wildlife-related recreation in 2011, which constituted an increase of 2.6 million participants since 2006. Although we do not have empirical data to support it: Deluxe considers there to be similarities and possible correlations between hunting and fishing. Those involved in wildlife-related recreation spent $130 billion on gear, trips, licenses, tags, and land leasing. More than 33 million people fished in 2011. They spent $41.8 billion on trips, equipment, licenses and other items, an average of $1,262.00 per angler. Statistics gathered by the American Fishing Association estimates that the ice fishing market exceeded $260 Million in 2012, an increase of nearly 10% over 2011. Our data is not suggesting that the increase in total sales from 2011 to 2012 are new anglers; however, it may suggest a relationship with dollars spent in other wildlife-related recreational categories.
There are no immediate or imminent threats to the supply or prices of related materials due to shortages or other factors that we are aware of at this time. To our knowledge, at this time there are no government regulations, in the United States or Canada, that would prohibit or negatively affect Deluxe from importing or exporting our product(s) into or out of those countries. To our knowledge, at this time there are no import/export regulations or controls imposed by any of the potential countries, from which our product(s) could originate, that would prevent us from obtaining our product(s) or shipping our products to the U.S. or Canada.
The Company provides no assurance it will be able to compete in any of its business areas effectively with current or future competitors or that the competitive pressures faced by the Company will not have a material adverse effect on the business, financial condition and operating results.
The Company currently has no employees and has no plans to hire any employees during the next twelve (12) months of operation. Deluxe intends to use contracted services to conduct all aspects of its business.
Office and Other Facilities
DD’s Deluxe Rod Holder, Inc. currently maintains its administrative offices, at no cost to the Company, in space provided to it by the Company’s sole officer, director and single largest shareholder. The telephone number is (306) 716-5372. Deluxe does not currently own title to any real property.
Employees
The Company has no employees other than its executive officers as of the date of this Quarterly Report on Form 10-Q. Deluxe conducts business largely through independent contractor agreements with consultants.
Research and Development
As we build out our organization, we intend to incorporate a business development component that will be responsible for researching opportunities for growth; such as marketing our product abroad and expanding our shipping and distribution to Europe, and other parts of the world. Our intended market for the first 12 months of production and sales will be the U.S. and Canada.
12
Reports to Security Holders
The Company does not issue annual or quarterly reports to security holders other than the annual Form 10-K and quarterly Forms 10-Q as electronically filed with the SEC. Electronically filed reports may be accessed atwww.sec.gov. Interested parties also may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street NW, Washington, DC 20549. Information may be obtained on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330.
PLAN OF OPERATION
The Company maintains a corporate office in Saskatoon, Saskatchewan Canada. This is the primary administrative office for the Company and is utilized by the Company’s sole officer and director, Desmond Deschambeault.
During the first stages of our growth, our sole officer and director will provide all the labor required to execute our business plan, and since we intend to operate with very limited administrative support, he will continue to be responsible for the majority of labor required for at least the first year of operations. We anticipate our sole officer and director will be able to initially devote up to 20-25 hours per week toward the development of our business.
We are a development stage enterprise with limited operations. We have had no revenues since inception, and have limited financial backing and assets.
Our plan of operation is to obtain a non-provisional utility patent from the United States Patent and Trademark Office for our fishing rod holder. We expect this process to take at least eighteen (18) to twenty-four (24) months.
Based upon our estimated costs we will need at least twenty-five thousand dollars ($25,000) in capital for the next twelve (12) months of operations in order to sustain our business. This amount of capital will only allow us to put into operation a minimal amount of our business plan. If we are only able to source a minimal amount of capital our president will have to dedicate more time and remain extremely judicious regarding implementing the plan of operations. If we are unable to source at least this minimum amount, we will be forced to locate additional sources of capital which may not be available to us on favorable terms or at all.
The Company will not approach companies or commence sales of its prototype until it has obtained a non-provisional utility patent from the United States Patent Office. On February 24, 2016, the Company submitted its application for a non-provisional utility patent, to the USPTO. To date, the Company has received no communication from the USPTO regarding its application for a non-provisional utility patent.
Upon the successful grant of our non-provisional utility patent, we can share our idea with already existing sporting goods and/or fishing equipment companies and prepare marketing strategies for our product. If we cannot find an already existing sporting goods/fishing equipment company that is interested in taking on our product, we will work toward having it manufactured, and market it ourselves utilizing an online shopping cart through our domain name “deluxerodholder.com,” and potentially through other forms of direct marketing and distribution such as social media, attending/sponsoring ice-fishing tournaments, trade shows, infomercials or other forms of marketing and distribution.
The Company has no plans to hire employees during the next year of operations. The President has a functional home office where he has all the necessary space and equipment to conduct Deluxe business for at least the next year of operations. He plans to continue to supply the necessary office space and facilities to the Company for at least the next year of their operations at no cost to the Company. The President also has access to, and experience with the necessary professional and clerical resources that the Company can engage any time on a fee for service or contractual basis.
The Company’s continuation as a going concern or ultimately to attain profitability is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing as may be
13
required and to further develop its proposed product. Potential sources (other than from operating revenues) of cash, or relief of demand for cash, include additional external debt, the sale of shares of the Company’s stock or alternative methods such as joint ventures, mergers or sale(s) of the Company’s assets. No assurances can be given, however, that the Company will be able to obtain any of these potential sources of cash. The Company currently requires additional cash funding from outside sources to fully develop its business plan.
RESULTS OF OPERATIONS
The Company has earned no revenues from operations since its inception and does not anticipate earning any revenues, from operations, in the foreseeable future. DD’s Deluxe Rod Holder, Inc. is a development stage company and presently is engaged in the business of developing a fishing rod holder primarily for use in the sport of ice fishing.
Operating expenses
For the three months ended June 30, 2017, the Company incurred total operating expenses of $10,820, a decrease of $10,491 compared to $ 21,311 for the three months ended June 30, 2016.
For the six months ended June 30, 2017, the Company incurred total operating expenses of $23,563, an decrease of $10,391 compared to $33,954 for the six months ended June 30, 2016.
Legal and professional fees
The following table presents legal and professional fees for the three months ended June 30, 2017 and 2016:
| Three months ended June 30, |
|
| |||||
| 2017 |
| 2016 |
| Increase (decrease) | |||
Legal fees | $ | 7,575 |
| $ | 11,536 |
| $ | (3,961) |
Accounting and audit fees |
| 2,600 |
|
| 9,100 |
|
| (6,500) |
Total legal and professional fees | $ | 10,175 |
| $ | 20,636 |
| $ | (10,461) |
|
|
|
|
|
|
|
|
|
Legal fees decreased $3,961 for the three months ended June 30, 2017, compared to the same period ended June 30, 2016. The decrease was primarily related to legal costs associated with documentation of reporting disclosures which did not recur during the current period.
For the three months ended June 30, 2017, accounting and audit fees decreased $6,500 compared to the same period ended June 30, 2016. The decrease is related to the billing of the Company’s year-end audit being incurred in an earlier period than in the prior year.
The following table presents legal and professional fees for the six months ended June 30, 2017 and 2016:
| Six months ended June 30, |
|
| |||||
| 2017 |
| 2016 |
| Increase (decrease) | |||
Legal fees | $ | 12,468 |
| $ | 19,541 |
| $ | (7,073) |
Accounting and audit fees |
| 9,825 |
|
| 10,100 |
|
| (275) |
Total legal and professional fees | $ | 22,293 |
| $ | 29,641 |
| $ | (7,348) |
|
|
|
|
|
|
|
|
|
Legal fees decreased $7,073 for the six months ended June 30, 2017, compared to the same periods ended June 30, 2016. The decrease is primarily related to legal costs associated with documentation of reporting disclosures which did not recur during the current period.
14
For the six months ended June 30, 2017, accounting and audit fees decreased $275 compared to the six months ended June 30, 2016.
Transfer agent and general and administrative expense
For the three months ended June 30, 2017, the Company incurred transfer agent expense of $600, compared to $Nil for the comparable three months ended June 30, 2016, a decrease of $600. For the six months ended June 30, 2017, the Company incurred transfer agent expense of $1,225 compared to $1,778 for the same six months ended June 30, 2016, a decrease of $553.
For the three months ended June 30, 2017, the Company incurred $45 general and administrative expense compared to $675 for the three months ended June 30, 2016. For the six months ended June 30, 2017, the Company incurred $45 general and administrative expense compared to $2,535 for the six months ended June 30, 2016. The decrease is related to certain printing and other expenses not recurring in the current period.
LIQUIDITY AND FINANCIAL CONDITION
Working capital | June 30, | ||||
| 2017 |
| 2016 | ||
Current assets | $ | 1,177 |
| $ | 19,400 |
Current liabilities |
| 84,531 |
|
| 62,163 |
Working capital deficit | $ | (83,354) |
| $ | (42,763) |
|
|
|
|
|
|
Cash Flows | Six months ended June 30, | ||||
| 2017 |
| 2016 | ||
Net cash used in operating activities | $ | (9,715) |
| $ | (13,840) |
Net cash used in investing activities |
| - |
|
| 32,340 |
Net increase (decrease) in cash during this period | $ | (9,715) |
| $ | 18,500 |
|
|
|
|
|
|
The Company has $1,177 in cash at June 30, 2017. The Company will be reliant upon the proceeds it raised from the sales of its common stock registered with the SEC on its Form S-1 originally filed on May 29, 2015 and declared effective on October 19, 2015, and potentially other (private or public) placements of equity or debt securities, loans from our sole director and officer, third party loans and/or future revenues from operations. The Company currently have no plans to conduct additional offerings (other than our current offering of registered shares of our common stock) of equity or debt securities. Except as set forth elsewhere in this Quarterly Report on Form 10-Q or in the financial statements and notes thereto, the Company has not secured any loans. Any future issuance of additional shares of our capital stock to finance our future operations will potentially reduce the control of current shareholders and may result in substantial additional dilution to shareholders.
At June 30, 2017, the Company had no long-term debt. The Company may borrow money in the future to finance its future operations. Any such borrowing will increase the risk of loss to shareholders in the event the Company is unsuccessful in repaying such loans.
There are no guarantees the Company will be able to source any additional funding, of any kind, on terms acceptable to the Company, or at all.
OFF-BALANCE SHEET ARRANGEMENTS
15
The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to its stockholders.
CRITICAL ACCOUNTING POLICIES
Revenue and Cost Recognition
We recognize revenue at the time the product is provided and paid for by the customer. We follow Accounting Standards Codification (“ASC”) 605, “Revenue Recognition” Issue ASC 605 requires that all amounts billed to customers related to shipping and handling should be classified as revenues. Our service costs include amounts for shipping and handling, therefore, we charge our customers shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping services to the customer is recognized at the time the services are shipped to the customer and our policy is to classify them as shipping expenses. The cost of shipping services to the customer is classified as a shipping expense.
In addition to the above, ASC 605 address certain criteria for revenue recognition. ASC 605 outlines the criteria that must be met to recognize revenue and provides guidance for disclosures related to revenue recognition policies. Our revenue recognition policies comply with the guidance contained in ASC 605.
Delays in new accounting rules and standards
Deluxe has elected to take advantage of the transition period afforded to emerging growth companies and as a result, we will delay adoption of new or revised accounting standards that have different dates of application for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not hold any derivative instruments and does not engage in any hedging activities.
ITEM 4. CONTROLS AND PROCEDURES
Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures
At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective as it was determined that there were material weaknesses affecting our disclosure controls and procedures.
Management of the company believes that these material weaknesses are due to the small size of the company’s accounting staff. The small size of the company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As the Company grows, management expects to increase the number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.
CEO and CFO Certifications
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with
16
the Section 302 Certifications for a more complete understanding of the topics presented.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2017 that has affected, or are reasonably likely to affect, its internal control over financial reporting.
17
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
DD’s Deluxe Rod Holder, Inc. is not a party to any material legal proceedings and, to Management’s knowledge, no such proceedings are threatened or contemplated. No director, officer or affiliate of DD’s Deluxe Rod Holder, Inc. and no owner of record or beneficial owner of more than 5% of the Company’s securities or any associate of any such director, officer or security holder is a party adverse to DD’s Deluxe Rod Holder, Inc. or has a material interest adverse to DD’s Deluxe Rod Holder, Inc.in reference to pending litigation
ITEM 1A.
RISK FACTORS
There have been no material changes from the risk factors as previously disclosed in the Company’s Form 10-K for the year ended December 31, 2016 which was filed with the SEC on March 30, 2017.
ITEM 2.
RECENT SALES OF UNREGISTERED SECURITIES
There were no sales of unregistered securities of the Company during the quarter ended June 30, 2017.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4.
MINE SAFETY DISCLOSURES
N/A
ITEM 5.
OTHER INFORMATION.
None
18
ITEM 6.
|
|
Exhibit Number | Description of Exhibits |
|
|
3.1 | Articles of Incorporation.(1) |
|
|
3.2 | Bylaws(1) |
31.1 | Certification of Principal Executive Officer and Principal Financial Officer and adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32.1 | Certification of Principal Executive Officer and Principal Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
101.INS* | XBRL Instance Document |
|
|
101.SCH* | XBRL Taxonomy Schema Document |
|
|
101.CAL* | XBRL Taxonomy Calculation Linkbase |
|
|
101.DEF* | XBRL Taxonomy Definition Linkbase |
|
|
101.LAB* | XBRL Taxonomy Label Linkbase |
|
|
101.PRE* | XBRL Taxonomy Label Presentation Linkbase |
|
|
(1) | Filed with the SEC as an exhibit to the Company’s Registration Statement on Form S-1 originally filed on May 29, 2015, as amended. |
|
|
(*) | XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended and otherwise is not subject to liability under these sections. |
|
|
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
| DD’S DELUXE ROD HOLDER, INC. |
|
|
|
|
|
|
|
|
Date: | July 25, 2017 | By: | /s/Desmond Deschambeault |
|
|
| DESMOND DESCHAMBEAULT |
|
|
| President |
|
|
| (Principal Executive Officer) |
|
|
|
|
Date: | July 25, 2017 |
| /s/Desmond Deschambeault |
|
| By: | DESMOND DESCHAMBEAULT |
|
|
| Treasurer |
|
|
| (Principal Financial Officer) |
20