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EX-31.1 - CERTIFICATION - HALL TEES, INC. | ex31one.htm |
EX-32.1 - CERTIFICATON - HALL TEES, INC. | ex32one.htm |
EX-31.2 - CERTIFICATION - HALL TEES, INC. | ex31two.htm |
CURRENT
REPORT FOR ISSUERS SUBJECT TO THE
1934
ACT REPORTING REQUIREMENTS
FORM
10-K
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act
For the
Fiscal Year Ended December 31, 2009
HALL
TEES, INC
(Exact
name of registrant as specified in its charter)
Nevada
|
333-150829
|
26-0875401
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification)
|
7405 Armstrong, Rowlett,
Texas 75088
(Address
of principal executive offices (zip code))
(214)
883-0140
(Registrant’s
telephone number, including area code)
(Former
address)
Securities
registered pursuant to Section 12(b) of the Act: NONE
Securities
registered pursuant to Section 12(g) of the Act: Common
Stock
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Act of 1934 during the past 12
months and (2) has been subject to such
filing requirement for the past 90
days Yes [X] No
[ ].
Indicate
by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
"large accelerated filer," "accelerated filer"
and smaller reporting company" in Rule 12b-2 of the Exchange
Act:
Large
Accelerated Filer [ ].
|
Accelerated
Filer [ ].
|
|
Non-Accelerated
Filer [ ].
|
Smaller
Reporting Company [X]
|
Indicate
by a check mark whether the company is a shell company (as defined by Rule 12b-2
of the Exchange Act: Yes [ ] No [X
].
Aggregate
market value of the voting stock held by non-affiliates of the registrant as of
December 31, 2009: $0.
Shares of
common stock outstanding at February 26,
2010: 7,000,000
PART I.
FORWARD-LOOKING
STATEMENTS
This
annual report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, which we refer
to in this annual report as the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, which we refer to in this annual
report as the Exchange Act. Forward-looking statements are not statements of
historical fact but rather reflect our current expectations, estimates and
predictions about future results and events. These statements may use words such
as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project”
and similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management’s beliefs and
assumptions, using information currently available to us. These forward-looking
statements are subject to risks, uncertainties and assumptions, including but
not limited to, risks, uncertainties and assumptions discussed in this annual
report. Factors that can cause or contribute to these differences include those
described under the headings “Risk Factors” and “Management Discussion and
Analysis and Plan of Operation.”
If one or
more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from what
we projected. Any forward-looking statement you read in this annual report
reflects our current views with respect to future events and is subject to these
and other risks, uncertainties and assumptions relating to our operations,
results of operations, growth strategy and liquidity. All subsequent written and
oral forward-looking statements attributable to us or individuals acting on our
behalf are expressly qualified in their entirety by this paragraph. You should
specifically consider the factors identified in this annual report which would
cause actual results to differ before making an investment decision. We are
under no duty to update any of the forward-looking statements after the date of
this annual report or to conform these statements to actual results.
ITEM
1. DESCRIPTION
OF BUSINESS
We were formed as a corporation on September 13, 2007. Our
executive offices are located at 7405 Armstrong, Rowlett, Texas 75088. We
specialize in providing specialty printing and silk screen services
products.
General
Hall
Tees, Inc. (The “Company”) operates as a printer and silk
screener. The Company is located in Rowlett, Texas and was
incorporated on September 13, 2007 under the laws of the State of
Nevada.
Hall
Tees, Inc., is the parent company of Hall Tees & Promotions, L.L.C., (“Hall
Tees Texas”), a company incorporated under the laws of the State of Texas on
September 13, 2007. Hall Tees Texas was established in 2007 and since that time
has been operating a single facility in Texas.
On
September 13, 2007, Hall Tees, Inc. ("Hall Tees Nevada"), a private holding
company established under the laws of Nevada, was formed in order to acquire
100% of the outstanding common stock of Hall Tees Texas. On September
15, 2007, Hall Tees Nevada issued 7,000,000 shares of common stock in exchange
for a 100% equity interest in Hall Tees Texas. As a result of the
share exchange, Hall Tees Texas became the wholly owned subsidiary of Hall Tees
Nevada. As a result, the shareholders of Hall Tees Texas owned a
majority of the voting stock of Hall Tees Nevada. William Lewis was the control
person in each of the Companies immediately prior to the share
exchange.
2
BUSINESS
OPERATIONS:
Hall Tees
is a custom T-shirt printer, silk screen printer, embroiderer of shirts and
hats, silk screener of hats, and a corporate apparel printer. Hall Tees provides
quality T-shirt printing and screen printing, focusing on reliability and
customer satisfaction. If a customer can articulate their image for a T-shirt or
apparel, we can reproduce it through conversations with our production staff. We
work hard to be accommodating and produce product that can be shipped
worldwide.
At
present, our market territory is primarily local, soliciting business through
word-of-mouth and light advertising such as the Yellow Pages. We continue to
develop our local market with targeted phone calls and in-person visits to
targeted businesses. On a larger scale, our web site will give us access to a
national market. We continue to develop our web site, just1tee.com, to market and
deliver our products to anyone with an internet connection and a shipping
address.
We screen
print and embroider T-shirts, jackets, hats, caps, pants, sweatshirts, jersey’s,
uniforms and even bags. Although we are no longer a development stage company as
defined by the FASB ASC 915(formerly Financial Accounting Standards Board No.
7), the Company is less than two years old and as such do not have a developed
distribution process. As stated previously, our marketing efforts have been
primarily local through print advertising and word-of-mouth. This has provided
for local deliveries which don’t require a sophisticated distribution system. As
we build out our web site, we will simultaneously develop a more sophisticated
distribution process through direct shipment.
Our
principal suppliers are Stanton Wholesale, Graphic Solutions and Pad Print
Logic. Stanton Wholesale supplies the company with the Tee Shirt product.
Graphic Solutions provides the state of the art screen printing technology. Pad
Print Logic supplies ink and related products. We do not anticipate any
disruption in the supply of these raw materials or the technological support for
the screen printing process.
Our
corporate facilities are located in a 1,200 sf office warehouse space in
Rockwall, Texas. We have no lease commitments as we are on a month to month
lease of $1,000 per month, and we have a 1,000 sf office at 7405 Armstrong,
Rowlett, Texas 75087, which is in the name of the president. The warehouse is on
a well-traveled road parallel to a major Interstate. The building has visibility
from the Interstate and is in close proximity to major retail outlets such as
Wal-Mart, Target, Best Buy, and various other retail strip outlets. We purchase
product by container load resulting in higher retail margins, cheaper pricing to
the public, and a non-dependency on any one supplier.
The
Company has performed pad printing, which is still a mainstay for the business,
printing anything from pens to USB drives. Currently we are negotiating to print
anywhere from 4000 to 40,000 USB drives per month. Silk-screen
printing comprises the majority of the remainder of our revenues, comprising 30%
of the total sales. We have the capability to do laser engraving to
gain a larger market in my USB decorating sales.
On
January 1, 2008 the Company entered into a capital lease agreement with Graphic
Solutions Group, Inc., for a BROTHER GT-541 which uses cutting edge ink jet
technology that prints on many garments in high quality color directly from a
computer – known as “Direct to Garment” printing. Lease payments,
principal and interest, total $29,220 for the length of the lease. Payments of
$487 including principal and interest at 12% are due monthly through December
2012.
This
revolutionary technology came out about five years ago and has been growing
rapidly. The Brother GT-541(Direct to Garment printer) uses ink jet technology
that prints on many garments in high quality color directly from a computer.
This ink jet garment printer is as simple to operate as a desktop printer, which
can be networked with multiple units, to deliver greater print quality and still
remain cost-effective for short-run apparel graphics applications.
3
The
GT-541 is faster and less expensive to operate than traditional screen printing
machines due to minimal set-up, tear-down, clean-up, screens, squeegees, or
pallet adhesive. The GT-541 water based ink can be cured by a standard heat
press, eliminating the need to purchase a conveyor dryer, and significantly
thereby reducing operating space requirements.
Conventional
silk-screening requires large operational space, special chemicals for
processing and reclaiming of screens, exposure units, and a wide range of inks,
not to mention a very large investment to be competitive. Generally, under the
conventional silk process, a minimum number of shirts have to be purchased,
artwork separated, screens made (1 screen per color) at the rate of $25 per
screen, designs limited to 6-8 colors in most cases not to mention a small staff
to run the equipment.
The
Direct to Garment printer is so efficient the Company can now offer a “solution
to an age old problem”, NO Setups, NO minimums, and UNLIMITED
Colors. This technology has revolutionized the screen
print.
All
product sold is bought in its finished state. We perform no assembly or
manufacture, only printing, screen printing and embroidery. We are an
established business, having been incorporated on September 13, 2007. We do not
plan to offer any new products, however, we do plan to enhance our ordering and
production processes through the acquisition of cutting edge silk and
embroidery machinery as well as purchase industry best-in-class internet
software to facilitate the build-out of our internet marketing, ordering, and
delivery.
We source
most (80%) of our promotional products through organizations that promote
promotional products and companies. ASI (Advertising Specialty
Institute) and PPAI (Promotional Products Association International) are
organizations that provide connections to suppliers of finished
goods. Members have access to these suppliers and are afforded
discounts from these vendors.
GOVERNMENT
REGULATION:
The
Company’s business and products are not subject to material regulation. The
Company’s operations are not dependent on patents, copyrights, trade secrets,
know-how or other proprietary information. We do not anticipate doing so in the
future. We are not under any confidentiality agreements or
covenants.
INDUSTRY
& COMPETITION:
The
retail production of apparel printing and embroidery is retail focused and
therefore driven by the local economy and the individual tastes and preferences
of the purchaser. We are keenly aware that to be competitive we must not only
offer the best value for the money but also the service our customers expect
when purchasing. It is our opinion the competitiveness of the retail industry
for our product entails quality production, ascetic aspects of the products, and
service through product knowledge and timely delivery. Competition varies by
local retail outlets, internet based operations, and product
offering.
Our
primary competition is with large internet based customized apparel silk screen
printers and embroiders. Such competitors include Broken-Arrow (www.broken-arrow.com)
and Zazzle (www.zazzle.com).
These companies and companies similar to them provide a on-stop shopping
opportunity from customized screen printing and embroidery to personalized
designs to T-shirt silk screen printing to wholesale printing as well as
corporate and government ordering. Such companies offer high quality, cheap
prices, free custom design art, wholesale bulk pricing, fast ordering and
organic shirts. Usually they offer no set up fees, art design in-house, free
shipping up to $999.00, rush orders and 6 day or less production.
We
believe competition will be determined by price, service, and product selection.
The Company believes it is competitive in all three categories.
4
Price –
Due to discount purchasing through container of competitively priced quality
merchandise, the Company believes it has a competitive advantage with other
providers of similar services.
Selection
– Through the purchase of the aforementioned machinery and internet software we
expect to have a competitive advantage in production and selection.
Service –
We are structured to meet the same delivery and turn around time as our
competitors.
ITEM
2. DESCRIPTION
OF PROPERTY
Our
corporate facilities are located in a 1,200 sf office warehouse space in
Rockwall, Texas. We have no lease commitments as we are on a month to month
lease of $1,000 per month, and we have a 1,000 sf office at 7405 Armstrong,
Rowlett, Texas 75087, which is in the home of the President.
ITEM
3. LEGAL
PROCEEDINGS
As of
December 31, 2009, the Company is not involved in any legal
proceedings.
ITEM
4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
During
the year ending December 31, 2009 no matters were submitted to security holders
for a vote.
5
PART
II
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDERS’ MATTERS
|
Our stock
is not currently quoted on any exchange.
Dividends:
We have
not paid cash dividends on any class of common equity since formation and we do
not anticipate paying any dividends on our outstanding common stock in the
foreseeable future.
Warrants:
The
Company has no warrants outstanding.
ITEM
6. SELECTED
FINANCIAL DATA
Not applicable for smaller reporting
companies.
ITEM
7. MANAGEMENT
DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION
SUMMARY OF
2009
GOING
CONCERN:
The
Company has minimal operations and has negative working capital of approximately
$78,000 and $39,300 as of December 31, 2009 and December 31, 2008, respectively.
Because of this negative working capital and limited operating history and
limited operations, the Company may require additional working capital to
survive. The Company intends to raise additional working capital either through
private placements or bank loans or sale of common stock. There are no
assurances that the Company will be able to either of these. No assurance can be
given that additional financing will be available, or if available, will be on
terms acceptable to the Company. If adequate working capital cannot be
generated, the Company may not be able to continue its operations.
These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
EXECUTIVE
OVERVIEW:
2009 was
a challenging year as the national recession impacted corporate marketing
spending and our largest customer Direct Technologies, was having severe cash
flow problems. As discussed in the next section, revenue was down 28%
year-over-year, with the most significant reduction due to corporate customers,
primarily Direct Technologies (down $45,000). We rebounded with many
new customers (39) and now with funds that are being raised – our S-1/A filing
was approved in 2009 – we are able to buy machinery that will greatly improve
our efficiencies and hence enable us to bid on larger jobs.
Our
fourth fiscal quarter and fiscal year ended on December 31, 2009.
REVENUE: Revenue
for the year ended December 31, 2009, was $56,043 compared with revenues for the
twelve months ended December 31, 2008 of $78,303. The decline is
attributed to the slowing economy that started in the fourth quarter of 2008 and
continued through the first quarter of 2009. This decline has been
predominately in our corporate merchandising business and five corporate
customers totaled a reduction of about $46,900 year-over-year; lost customers
totaled approximately $9,600 for a total reduction of approximately $56,500.
New customer accounts netted about $32,300 and existing customers $1,900
in additional revenue resulting in a net reduction in revenue of about
$22,300.
6
COST OF
SALES: Cost of sales (COS) were $22,016 (or 39% of revenue) for the year ended
December 31, 2009 compared to $17,603 (or 23% of revenue) for the same period in
2008. The increase in COS by 16% points is due to net vendor price increases
that we were not able to pass on to the customer. We continually
search for alternative suppliers and will follow-up on supplier options in
2010.
OPERATING
EXPENSES. Operating expenses, exclusive of depreciation expense of $15,104 and
$15,524, were $66,876 and $89,971 for the twelve month periods ended December
31, 2009 and 2008 respectively. With the reduced revenue the Company
implemented cost reductions with the President leading the way by reducing his
own contract compensation by approximately $31,500 (from $41,200 to $9,700) and
reduced insurance costs of about $3,300. This was partially off-set
by professional fees (audit & filing fees) related to the S-1/A filings of
$11,000, and supplies of $700.
NET
INCOME (LOSS). The Net Loss for the year ended December 31, 2009 and 2008 was
increased from ($44,780) to ($48,013). The main driver behind the
reduction in the net loss was the reduction of operating expenses as discussed
above although revenue reduced about $22,300. Increased cost of sales
as a percent of sales resulted in additional costs of about $8,900, additionally
there was a credit to Cost of Sales in 2008 of $2,000.
LIQUIDITY
AND CAPITAL RESOURCES. In 2008, the Company filed a Form S-1
registration statement with the U.S. Securities & Exchange Commission
(“SEC”) in order to raise funds to expand its business and execute its business
plan.
In
addition to the preceding, the Company plans for liquidity needs on a short term
and long term basis as follows:
Short Term
Liquidity:
The
company relies on one primary funding source for short term liquidity needs:
advances from the major shareholder / President of the Company. The President
has advanced the Company $34,740 and $29,701 as of December 31, 2009 and
December 31, 2008, respectively, for working capital. No interest is
paid on this advance. This is also disclosed in Note 6 to the
December 31, 2009 financial statements.
Long Term
Liquidity:
The long
term liquidity needs of the Company are projected to be met primarily through
the cash flow provided by operations. Cash flow from Operating Activities for the
year ended December 31, 2009 improved by $26,227 versus full year 2008 (negative
$22,621) and operating cash flows at December 31, 2009 were positive
$3,606. This improvement has been a result of better asset management
and stabilization of margins on sales.
Capital
Resources
In
January 2008, the Company entered into a capital lease commitment that has a
term of five years, ending December 2012. The general purpose of the
lease commitment is for equipment that is used in the Company’s operations of
printing and puts us on the cutting edge of “Direct to Garment” printing as
discussed above. Annual commitments are $5,844 with a total five year
commitment of $29,220. The balance due at December 31, 2009 was
$17,532. The funds to fulfill this commitment will be primarily
sourced through operations. As of December 31, 2009 the Company had
positive operating cash flows of $3,606, and with the implementation of its
business plan, forecasts cash flows to be sufficient to source payment of this
commitment.
7
Material Changes in
Financial Condition
WORKING
CAPITAL: In the year ended December 31, 2009 working capital decreased by
approximately $38,750, or 99%, to ($78,017) versus December 31,
2008. This reduction is primarily due to an increase in current
liabilities of 82%, or $37,500, driven by an increase in accounts
payable/accrued expenses as the Company has stretched its payment days to the
President (rent) and others to offset the reduction in sales (reduced operating
cash flow). This increase in current liabilities was partially
off-set by a smaller decrease in current assets, 23%, or about $1,250 due to an
increase in cash of $2,800 and a decrease in accounts receivable of
$4,050. As the economy begins to rebound the Company expects sales to
improve.
Critical Accounting
Policies
The
Company’s critical accounting policies and estimates are depreciation expense,
reserve for doubtful accounts and interest expense accruals on capital
leases.
STOCKHOLDERS’
EQUITY (DEFICIT): Stockholders’ Equity changed by approximately negative $48,000
or 184% in the year ended December 31, 2009 versus December 31, 2008 due to
the net loss in the year ended December 31, 2009.
UNUSUAL
EVENTS: None.
FUTURE FINANCIAL CONDITION:
The Company is optimistic about its future and the opportunities
ahead. Now that our S-1/A has become effective we have the capital
necessary to execute our Plan of Operations (summarized below).
Plan of
Operations
The plan
of operations for the 12 months will include the continued growth plan of the
Company and will concentrate in three areas:
|
1.
|
Organic
growth through existing customers
|
|
2.
|
New
markets
|
|
3.
|
New
customers
|
Organic growth through existing
customers: Our organic growth in 2009 slowed with the economy as it was
at 2.5% of sales versus 2008 of 65%. This is one of our key
opportunities in 2010 and we plan to return double-digit growth. The
slowdown in growth in 2009 due to the economy stresses the importance for the
Company to raise capital to acquire the necessary equipment to improve
efficiencies and bring production in-house. This enables the Company to bid on
larger jobs and more competitive pricing. There are no current significant
seasonal trends in our business that will impact our business
quarter-to-quarter.
New Markets: We will explore
and review all opportunities to acquiring state of the art apparel printers and
developing and launching our shopping and ordering web site “Just 1
Tee”. By investing in new equipment combined with our web-site we
will reach new geographies and will be able to service customer projects that we
are currently unable to service.
New Customers: Through
increased marketing and advertising dollars we have been reaching new customers,
similar to what we currently service, as well as those mentioned above in new
markets. Marketing and advertising costs will be determined by the
amount raised in the initial offering. Advertising costs will include targeted
internet advertising, printed trade periodicals, and the solicitation of large
corporate accounts through the leveraging our President’s industry contacts
through ASI (Advertising Specialty Institute), PPAI (Promotional Products
Association International) and networking that he has developed over the past 14
years while being involved in the promotional products industry. If the minimum
amount is raised in this offering, in the first 12 months of operation, a
minimum amount of money will be spent on advertising.
8
The
Company plans to further enhance its software offerings and upgrading to state
of the art best in class printing equipment. We plan to invest at least $9,000
in the necessary assets.
ITEM
7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not
applicable for smaller reporting companies.
ITEM
8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company,
together with the independent auditors' report thereon of EFP Rotenberg, LLP,
appear on pages F-1 through F-11 of this report.
ITEM
9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
ITEM
9A. CONTROLS
AND PROCEDURES
Evaluation of Disclosure
Controls and Procedures
We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of December 31, 2009. This
evaluation was accomplished under the supervision and with the participation of
our chief executive officer / principal executive officer, and chief financial
officer / principal financial officer who concluded that our disclosure controls
and procedures are not effective to ensure that all material information
required to be filed in the annual Form 10-K has been made known to
them.
For
purposes of this section, the term disclosure controls and procedures means
controls and other procedures of an issuer that are designed to ensure that
information required to be disclosed by the issuer in the reports that it files
or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms. Disclosure, controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by in our reports filed under the Securities Exchange Act of
1934, as amended (the "Act") is accumulated and communicated to the issuer's
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
Based
upon an evaluation conducted for the period ended December 31, 2009, our Chief
Executive and Chief Financial Officer as of December 31, 2009 and as of the date
of this Report, has concluded that as of the end of the periods covered by this
report, we have identified the following material weaknesses in our internal
controls:
9
|
·
|
Reliance
upon independent financial reporting consultants for review of critical
accounting areas and disclosures and material non-standard
transaction.
|
|
·
|
Lack
of sufficient accounting staff which results in a lack of segregation of
duties necessary for a good system of internal
control.
|
In order
to remedy our existing internal control deficiencies, as our finances allow, we
will hire additional accounting staff.
Management’s Annual Report
on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control
system was designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes, in accordance with generally accepted accounting principles in the
United States of America. Our internal control over financial
reporting includes those policies and procedures that (i) pertain to the
maintenance records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have a material effect on
the financial statements.
Because
of inherent limitations, a system of internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate due to change in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
Our
management conducted an evaluation of the effectiveness of our internal control
over financial reporting using the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework at December 31, 2009. Based on its
evaluation, our management concluded that, as of December 31, 2009, our internal
control over financial reporting was not effective because of limited staff and
a need for a full-time chief financial officer. A material weakness
is a deficiency, or a combination of control deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a
material misstatement of the Company’s annual or interim financial statements
will not be prevented or detected on a timely basis.
This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to the attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management’s report in this annual
report.
Changes in Internal Controls
over Financial Reporting
We have
not yet made any changes in our internal controls over financial reporting that
occurred during the period covered by this report on Form 10-K that has
materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
10
PART
III
ITEM
10. DIRECTORS
AND EXECUTIVE OFFICERS OF REGISTRANT
Name
|
Age
|
Position
|
William
Lewis
|
53
|
Chief
Executive Officer, Chief Financial Officer, President,
Secretary and Director
|
Background
of the Director and Executive Officer:
William
Lewis.
After
graduating from high school in 1972, Mr. Lewis studied architecture and graphic
design at Ohio State University for three years before continuing his education
at Texas Central College, earning an associate degree in criminal justice. Those
studies led him to become a police officer. For the fourteen years prior to
starting Hall Tees, Inc. Mr. Lewis had a print and promotional advertising
company named Hallelujah T’s, which was dissolved in 2007 because of a lack of
capital. As President of Hall Tees, Inc. he works six days a week and spends
approximately eight hours on any given day on Hall Tees, Inc.
affairs.
Mr. Lewis
is a member and supporter of ASI (Advertising Specialty Institute) and PPAI
(Promotional Products Association International). Through these two
entities, over 80% of the promotional advertising products are sourced and sold
(please see description of business).
ITEM
11. EXECUTIVE
COMPENSATION
Following
is what our officers received in 2009 and 2008 as
cash and non-cash compensation.
Name
|
Capacity
Served
|
Aggregate
Remuneration
|
William
Lewis
|
Chief
Executive Officer, Chief Financial Officer, President,
Secretary and Director
|
2009:
$9,700
2008:
$41,261
|
As of the
date of this filing, our sole officer is our only employee. We have no
employment agreements with any officer, director or employee.
ITEM
12.
|
SECURITY
OWNERSHIP OF MANANGEMENT AND BENEFICIAL
OWNERS
|
As of
December 31, 2009 the following person is known to the Company to own 5% or more
of the Company's Voting Stock:
Title
/ Relationship to Issuer
|
Name
of Owner
|
Number
of Shares Owned
|
Percent
of Total
|
Director,
President, Secretary and Director
|
William
Lewis
|
6,450,000
|
92.14%
|
11
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY
TRANSACTION
|
As of the
date of this filing, the following are agreements or proposed transactions,
whether direct or indirect, with related parties:
|
·
|
The
Company rents warehouse space from the President at $1,000 per month on a
month-to-month lease. As of December 31, 2009 $12,000 was
accrued for rent expense not yet
paid.
|
|
·
|
The
Company owes the Company’s President $34,740 as of December 31, 2009 for
operating expenses paid on the Company’s
behalf.
|
There are
no other agreements or proposed transactions with related
parties.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) AUDIT
FEES
The
aggregate fees billed for professional services rendered by our auditors, for
the audit of the registrant's annual financial statements and review of the
financial statements included in the registrant's Form 10-K or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for fiscal year 2009 was $7,850 and in 2008 was
$7,750.
(2)
AUDIT-RELATED FEES
The
aggregate audit fees billed for professional services rendered by our auditors
for the review of the quarterly unaudited financial statements included in the
registrant’s Forms S-1 and S-1/A were approximately $15,000 in 2009 and $0 in
2008.
(3) TAX
FEES
NONE
(4) ALL
OTHER FEES
NONE
(5) AUDIT
COMMITTEE POLICIES AND PROCEDURES
Audit
Committee Financial Expert
The
Securities and Exchange Commission has adopted rules implementing
Section 407 of the Sarbanes-Oxley Act of 2002 requiring public companies to
disclose information about “audit committee financial experts.” As of the
date of this Annual report, we do not have a standing Audit Committee. The functions of the
Audit Committee are currently assumed by our Board of Directors.
Additionally, we do not have a member of our Board of Directors that qualifies
as an “audit committee financial expert.” For that reason, we do not have
an audit committee financial expert.
Policies
and Procedures:
The Board
of Directors policies and procedures for hiring Independent Principal
Accountants are summarized as follows:
|
·
|
The
Board ensures that the accountants are qualified by reviewing their valid
license information.
|
|
·
|
The
Board ensures that the firm is registered with the
PCAOB.
|
|
·
|
The
Board ensures that the accountants are independent by reviewing Regulation
S-X, section 210.2-01(b).
|
12
(6)
If greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees.
Not
applicable.
13
PART IV
ITEM
15.
|
EXHIBITS,
FINANICAL STATEMENTS AND REPORTS ON FORM
8-K
|
(a) The
following documents are filed as part of this report: Included in
Part II, Item 7 of this report:
Report of Independent Registered
Accounting Firm
Consolidated Balance Sheets as of
December 31, 2009 and 2008
Consolidated
Statements of Operations for the Years Ended December 31, 2009 and
2008
Consolidated
Statement of Changes in Stockholders’ Equity(Deficit) for the Years Ended
December 31, 2009 and 2008
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2009 and
2008
Notes to
the Consolidated Financial Statements
(b) The
Company filed one Form 8-K on October 8, ,2009 referencing the change in
certifying accountants.
(c) Exhibits
No.
|
Description
|
31.1
|
Certification
of the Company’s Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|
31.2
|
Certification
of the Company’s Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|
32.1
|
Certification
of the Company’s Principal Executive Officer and Principal Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
14
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this Annual Report on Form 10-K to be signed on its behalf by the
undersigned hereunto duly authorized.
HALL
TEES, INC.
By:
/s/ William
Lewis
William Lewis
William Lewis
Chief
Executive Officer & Chief Financial Officer
Dated:
March 15, 2010
15
HALL
TEES, INC.
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2009
CONTENTS
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
F-3
|
Consolidated
Statements of Operations for the Years Ended December 31, 2009 and
2008
|
F-4
|
Consolidated
Statement of Changes in Stockholders’ Equity for the Years Ended December
31, 2009 and 2008
|
F-5
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2009 and
2008
|
F-6
|
Notes
to the Consolidated Financial Statements
|
F-7
to F-11
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Hall Tees, Inc.
As
successor by merger, effective October 1, 2009, to the registered public
accounting firm Rotenberg & Co., LLP, we have audited the accompanying
consolidated balance sheets of Hall Tees, Inc. as of December 31, 2009 and 2008,
and the related consolidated statements of operations, changes in
stockholders’ equity (deficit), and cash flows for each of the years in the
two-year period ended December 31, 2009. Hall Tees, Inc.’s management is
responsible for these consolidated financial statements. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.
We have
audited the accompanying consolidated balance sheets of Hall Tees, Inc. as of
December 31, 2009 and 2008, and the related consolidated statements
of operations, changes in stockholders’ equity (deficit), and cash
flows for each of the years in the two-year period ended December 31, 2009. Hall
Tees, Inc.’s management is responsible for these consolidated financial
statements. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Hall Tees, Inc. as of
December 31, 2009 and 2008, and the results of its operations and its cash flows
for each of the years in the two-year period ended December 31, 2009 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ EFP Rotenberg, LLP
EFP
Rotenberg, LLP
Rochester,
New York
March 15,
2010
F-2
HALL
TEES, INC.
Consolidated
Balance Sheets
December
31, 2009 and 2008
|
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and Cash Equivalents
|
$ | 3,469 | $ | 668 | ||||
Accounts
Receivable, Net of Allowance
|
||||||||
for
Doubtful Accounts of $11,266 and $6,864
|
2,007 | 6,053 | ||||||
Total
Current Assets
|
5,476 | 6,721 | ||||||
Fixed
Assets, Net of Accumulated Depreciation of $31,461 and
$16,357
|
67,759 | 82,863 | ||||||
TOTAL
ASSETS
|
$ | 73,235 | $ | 89,584 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY(Deficit)
|
||||||||
Current
Liabilities
|
||||||||
Accounts
Payable
|
$ | 30,706 | $ | 10,249 | ||||
Accrued
Expenses
|
12,203 | 191 | ||||||
Amounts
due Shareholder
|
34,740 | 29,701 | ||||||
Current
Portion of Capital Lease
|
5,844 | 5,844 | ||||||
Total
Current Liabilities
|
83,493 | 45,985 | ||||||
Long
Term Liabilities
|
||||||||
Capitalized
Lease Obligation
|
17,532 | 23,376 | ||||||
Less:
Current Portion
|
(5,844 | ) | (5,844 | ) | ||||
Total
Long Term Liabilities
|
11,688 | 17,532 | ||||||
Total
Liabilities
|
95,181 | 63,517 | ||||||
Stockholders'
Equity (Deficit)
|
||||||||
Preferred
Stock, $.001 par value, 25,000,000 shares authorized,
|
||||||||
0
and 0 shares issued and outstanding
|
0 | 0 | ||||||
Common
Stock, $.001 par value, 50,000,000 shares authorized,
|
||||||||
7,000,000
shares issued and outstanding
|
7,000 | 7,000 | ||||||
Additional
Paid-In Capital
|
63,000 | 63,000 | ||||||
Accumulated
Deficit
|
(91,946 | ) | (43,933 | ) | ||||
Total
Stockholders' Equity (Deficit)
|
(21,946 | ) | 26,067 | |||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY(Deficit)
|
$ | 73,235 | $ | 89,584 |
The
Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-3
HALL
TEES, INC.
Consolidated
Statements of Operations
For
the Years Ended December 31, 2009 and
2008
|
2009 | 2008 | |||||||
REVENUE
|
$ | 56,043 | $ | 78,303 | ||||
COST
OF SALES
|
22,016 | 17,603 | ||||||
GROSS
PROFIT
|
34,027 | 60,700 | ||||||
OPERATING
EXPENSES
|
||||||||
Depreciation
|
15,104 | 15,524 | ||||||
Selling
and Advertising Expenses
|
8,742 | 9,675 | ||||||
Other
General Expenses
|
58,134 | 80,296 | ||||||
TOTAL
OPERATING EXPENSES
|
81,980 | 105,495 | ||||||
NET
OPERATING LOSS
|
(47,953 | ) | (44,795 | ) | ||||
OTHER
INCOME (EXPENSE)
|
||||||||
Interest
Income
|
- | 15 | ||||||
Interest
Expense
|
(60 | ) | - | |||||
TOTAL
OTHER INCOME (EXPENSE)
|
(60 | ) | 15 | |||||
NET
LOSS BEFORE INCOME TAXES
|
(48,013 | ) | (44,780 | ) | ||||
Provision
for Income Taxes (Expense) Benefit
|
0 | 0 | ||||||
NET
LOSS
|
$ | (48,013 | ) | $ | (44,780 | ) | ||
EARNINGS
PER SHARE, Basic and Diluted
|
||||||||
Weighted
Average of Outstanding Shares
|
7,000,000 | 7,000,000 | ||||||
Income
(Loss) for Common Stockholders
|
$ | (0.01 | ) | $ | (0.01 | ) |
The
Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-4
HALL
TEES, INC.
Consolidated
Statement of Changes in Stockholders’ Equity(Deficit)
For
the Years Ended December 31, 2009 and
2008
|
Common Stock | Paid-In | Retained | ||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
(Deficit)
|
Totals
|
||||||||||||||||
Stockholders'
Equity,
|
||||||||||||||||||||
January 1, 2008 | 7,000,000 | $ | 7,000,877 | $ | 63,000 | $ | 847 | $ | 70,847 | |||||||||||
Net
Loss
|
(44,780 | ) | (44,780 | ) | ||||||||||||||||
Stockholders'
Equity,
|
||||||||||||||||||||
December 31, 2008 | 7,000,000 | $ | 7,000 | $ | 63,000 | $ | (43,933 | ) | $ | 26,067 | ||||||||||
Net
Loss
|
(48,013 | ) | (48,013 | ) | ||||||||||||||||
Stockholders'
Deficit,
|
||||||||||||||||||||
December
31, 2009
|
7,000,000 | $ | 7,000 | $ | 63,000 | $ | (91,946 | ) | $ | (21,946 | ) |
The
Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-5
HALL
TEES, INC.
Consolidated
Statements of Cash Flows
For
the Years Ended December 31, 2009 and
2008
|
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
Loss
|
$ | (48,013 | ) | $ | (44,780 | ) | ||
Adjustments
to reconcile net loss to net cash used
|
||||||||
(provided)
by operating activities:
|
||||||||
Depreciation
|
15,104 | 15,524 | ||||||
Bad
Debt Expense
|
8,884 | 6,864 | ||||||
Changes
in assets and liabilities:
|
||||||||
(Increase)
in Accounts Receivable
|
(4,838 | ) | (9,859 | ) | ||||
Increase
in Accounts Payable
|
20,457 | 9,555 | ||||||
Increase
in Accrued Expenses
|
12,012 | 75 | ||||||
Net
Cash Provided/(Used) by Operating Activities
|
3,606 | (22,621 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Capitalized
Lease Payments
|
(5,844 | ) | (5,844 | ) | ||||
Borrowings
from Stockholder
|
5,039 | 15,422 | ||||||
Net
Cash Provided/(Used) by Financing Activities
|
(805 | ) | 9,578 | |||||
NET
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
2,801 | (13,043 | ) | |||||
CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
668 | 13,711 | ||||||
CASH
AND CASH EQUIVALENTS AT END OF YEAR
|
$ | 3,469 | $ | 668 | ||||
SUPPLEMENTAL
DISCLOSURES
|
||||||||
Cash
Paid During the Year for Interest Expense
|
$ | 32 | $ | 2,355 | ||||
Capitalized
Lease Obligation
|
$ | - | $ | 29,220 | ||||
The
Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-6
HALL
TEES, INC.
Notes
to the Consolidated Financial Statements
December
31, 2009 and 2008
|
NOTE
1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities,
History and Organization:
Hall
Tees, Inc. (The “Company”) operates as a printer and silk
screener. The Company is located in Rowlett, Texas and was
incorporated on September 13, 2007 under the laws of the State of
Nevada.
Hall
Tees, Inc., is the parent company of Hall Tees & Promotions, L.L.C., (“Hall
Tees Texas”), a company incorporated under the laws of the State of Texas. Hall
Tees Texas was established in 2007 and for the past fifteen months has been
operating a single facility in Texas.
On
September 12, 2007, Hall Tees, Inc. ("Hall Tees Nevada"), a private holding
company established under the laws of Nevada, was formed in order to acquire
100% of the outstanding membership interests of Hall Tees Texas. On
September 15, 2007, Hall Tees Nevada issued 7,000,000 shares of common stock in
exchange for a 100% equity interest in Hall Tees Texas. As a result
of the share exchange, Hall Tees Texas became the wholly owned subsidiary of
Hall Tees Nevada. As a result, the members of Hall Tees Texas owned a
majority of the voting stock of Hall Tees Nevada. The transaction was
regarded as a reverse merger whereby Hall Tees Texas was considered to be the
accounting acquirer as its members retained control of Hall Tees Nevada after
the exchange, although Hall Tees Nevada is the legal parent
company. The share exchange was treated as a recapitalization of Hall
Tees Nevada. As such, Hall Tees Texas (and its historical financial
statements) is the continuing entity for financial reporting purposes. The
financial statements have been prepared as if Hall Tees Nevada had always been
the reporting company and, on the share exchange date, changed its name and
reorganized its capital stock.
Significant Accounting
Policies:
The
Company’s management selects accounting principles generally accepted in the
United States of America and adopts methods for their
application. The application of accounting principles requires the
estimating, matching and timing of revenue and expense. Below is a
summary of certain significant accounting policies selected by
management.
The
financial statements and notes are representations of the Company’s management
which is responsible for their integrity and objectivity. Management further
acknowledges that it is solely responsible for adopting sound accounting
practices, establishing and maintaining a system of internal accounting control
and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items,
that 1) recorded transactions are
valid; 2) valid transactions are
recorded; and 3)
transactions are recorded in the proper period
in a timely manner to produce financial statements which
present fairly the financial condition, results of
operations and cash flows of
the Company for
the respective periods being
presented.
FASB Accounting Standards
Codification:
In June
2009, the Financial Accounting Standards Board (“FASB”) issued new guidance
concerning the organization of authoritative guidance under U.S. Generally
Accepted Accounting Principles (“GAAP”). This new guidance created the FASB
Accounting Standards Codification (“Codification”). The Codification
has become the source of authoritative U.S. GAAP recognized by the FASB to be
applied by nongovernmental entities. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants. The Codification became effective for the Company
in its quarter ended September 30, 2009. As the Codification is not intended to
change or alter existing U.S. GAAP, it did not have any impact on the Company’s
consolidated financial statements. On its effective date, the Codification
superseded all then-existing non-SEC accounting and reporting standards. All
other non-grandfathered non-SEC accounting literature not included in the
Codification will become non-authoritative.
F-7
Basis of
Presentation:
The
Company prepares its financial statements on the accrual basis of
accounting. All intercompany balances and transactions are
eliminated. The Company’s subsidiaries are
consolidated with the parent company.
Cash and Cash
Equivalents:
All
highly liquid investments with original maturities of three months or less are
included in cash and cash equivalents. All deposits are maintained in
FDIC insured depository accounts in local financial institutions and balances
are insured up to $250,000.
Fair Value of Financial
Instruments:
The
carrying amounts of cash, cash equivalents, accounts receivable, capital leases,
accounts payable and notes payable approximate their fair values due to the
short-term maturities of these instruments.
Accounts
Receivable:
Accounts
receivable are carried at their face amount, less an allowance for doubtful
accounts. On a periodic basis, the Company evaluates accounts
receivable and establishes the allowance for doubtful accounts based on a
combination of specific customer circumstances and credit conditions, based on a
history of write offs and collections. The Company’s policy is
generally not to charge interest on trade receivables after the invoice becomes
past due. A receivable is considered past due if payments have not
been received within agreed upon invoice terms. The Company
provides an allowance for all receivables that are greater than 90 days old.
Allowances for Doubtful Accounts totaled $11,266 and $6,864 at December 31, 2009
and 2008 respectively. Write offs are recorded at a time when a
customer receivable is deemed uncollectible.
Fixed
Assets:
Fixed
assets are stated at cost if purchased, or at fair value in a nonmonetary
exchange, less accumulated depreciation. Major renewals and improvements
are capitalized; minor replacements, maintenance and repairs are charged to
current operations. Depreciation is computed by applying the straight-line
method over the estimated useful lives which are generally three to seven
years. Leases that meet the requirements of ASC 840-10, Accounting
for Leases (formally SFAS No. 13) are capitalized and included in fixed
assets.
Revenue
Recognition:
The
Company recognizes revenue in accordance with ASC 605-10, "Revenue Recognition in Financial
Statements," (formerly Statement of Financial Accounting Standards
(“SFAS”) No. 48). Revenue will be recognized only when all of the following
criteria have been met:
|
·
|
Persuasive
evidence of an arrangement exists;
|
|
·
|
Ownership
and all risks of loss have been transferred to buyer, which is generally
upon shipment or at the time the service is
provided;
|
|
·
|
The
price is fixed and determinable;
and
|
|
·
|
Collectability
is reasonably assured.
|
F-8
Earnings per
Share:
Earnings
per share (basic) is calculated by dividing the net income (loss) by the
weighted average number of common shares outstanding for the period
covered. As the Company has no potentially dilutive securities, fully
diluted earnings per share is identical to earnings per share
(basic).
Income
Taxes:
Income
from the corporation is taxed at regular corporate rates per the Internal
Revenue Code. There are no provisions for current taxes due to net
available operating losses.
Recent Accounting
Pronouncements:
The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company’s results of
operations, financial position or cash flow.
Use of
Estimates:
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
NOTE 2 – FIXED
ASSETS
Fixed
assets at December 31, 2009 and 2008 are as follows:
2009
|
2008
|
|||||||
Furniture
& Equipment
|
$ | 70,000 | $ | 70,000 | ||||
Capitalized
Leases
|
29,220 | 29,220 | ||||||
Gross
Fixed Assets
|
99,220 | 99,220 | ||||||
Less:
Accumulated Depreciation
|
(31,461 | ) | (16,357 | ) | ||||
Net
Fixed Assets
|
$ | 67,759 | $ | 82,863 |
Depreciation
expense for the years ended December 31, 2009 and 2008 was $15,104 and $15,524,
respectively.
NOTE 3 – CAPITALIZED AND
OPERATING LEASES
The
Company entered into a capitalized lease obligation during 2008 for a total of
$29,220. Payments of $487 including principal and interest at 12% are due
monthly through December 2012.
The
Company leases a 1,200 square foot warehouse space on a month to month basis for
$1,000 per month. Rent expense was $12,052 and $12,000 (see footnote 6) for the
years ended December 31, 2009 and 2008, respectively.
NOTE 4 – COMMON
STOCK
The
Company is authorized to issue 25,000,000 preferred shares at a par value of
$0.001 per share. These shares have full voting rights. At December
31, 2009 and December 31, 2008, there were zero shares outstanding.
The
Company is authorized to issue 50,000,000 common shares at a par value of $0.001
per share. These shares have full voting rights. At December 31, 2009
and December 31, 2008, there were 7,000,000 shares outstanding.
F-9
NOTE 5 – INCOME
TAXES
The
Company has adopted ASC 740-10 “Income Taxes”, (formerly FASB
Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes” (“FIN 48”), which supplemented SFAS No. 109, “Accounting for Income Taxes”
(“SFAS No. 109”)), which requires the use of the liability method in the
computation of income tax expense and the current and deferred income taxes
payable (deferred tax liability) or benefit (deferred tax asset).
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be.
Deferred
tax assets at December 31, 2009 and 2008 consisted of the
following:
Deferred
tax asset related to:
|
2009
|
2008
|
||||||
Prior
year
|
$ | 11,583 | $ | 0 | ||||
Tax
benefit for current year
|
11,404 | 11,583 | ||||||
Total
deferred tax asset
|
22,987 | 11,583 | ||||||
Less:
valuation allowance
|
(22,987 | ) | (11,583 | ) | ||||
Net
deferred tax asset
|
$ | 0 | $ | 0 |
The net
deferred tax asset generated primarily by the Company’s net operating loss
carryforward has been fully reserved. The cumulative net operating loss
carry-forward is approximately $91,900 at December 31, 2009, and will expire in
the years 2025 through 2029.
The
difference in the income tax benefit not shown in the consolidated statements of
operations and the amount that would result if the U.S. Federal statutory rate
of 25% were applied to pre-tax loss for 2009 and 2008 is attributable to the
valuation allowance.
The
realization of deferred tax benefits is contingent upon future earnings,
therefore, is fully reserved at December 31, 2009.
Upon
adoption of ASC 740-10, the Company had no gross unrecognized tax benefits that,
if recognized, would favorably affect the effective income tax rate in future
periods. The Company has not accrued any additional interest or
penalties as a result of the adoption of ASC 740-10.
The
Company recognizes interest and penalties related to unrecognized tax benefits
in general and administrative expense. During the year ended December 31, 2009
the Company recognized no interest and penalties.
NOTE 6 – RELATED PARTY
TRANSACTIONS
The
President and a Stockholder of the Company has advanced the Company $34,740 and
$29,701 as of December 31, 2009 and December 31, 2008, respectively, for working
capital. No interest is paid on this advance.
Under a
contract with the Company beginning November 6, 2007 and ending December 31,
2009, the President provides general management services to the Company for
$3,000 to $4,000 per month. Payroll expense incurred under this
contract totaled approximately $9,700 and $41,300 for the years ended December
31, 2009 and 2008, respectively.
The
Company pays rent of $1,000 per month to the President for warehouse
facilities. Total charges were $12,000 in 2009 and 2008.
F-10
NOTE 7– FINANCIAL CONDITION
AND GOING CONCERN
The
Company has minimal operations and has negative working capital of approximately
$78,000 and $39,300 as of December 31, 2009 and December 31, 2008, respectively.
Because of this negative working capital and limited operating history and
limited operations, the Company may require additional working capital to
survive. The Company intends to raise additional working capital either through
private placements or bank loans or sale of common stock. There are no
assurances that the Company will be able to either of these. No assurance can be
given that additional financing will be available, or if available, will be on
terms acceptable to the Company. If adequate working capital cannot be
generated, the Company may not be able to continue its operations.
These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE 8 – SUBSEQUENT
EVENTS
During
2009, the FASB issued ASC 855-10 “Subsequent
Events”, (formerly SFAS No. 165, “Subsequent Events,”) which
establishes general standards for accounting for and disclosure of events that
occur after the balance sheet date but before the financial statements are
issued or are available to be issued. The pronouncement requires the disclosure
of the date through which an entity has evaluated subsequent events and the
basis for that date, whether that date represents the date the financial
statements were issued or were available to be
issued. In conjunction with the preparation of
these financial statements, an evaluation of subsequent events was performed
through March 4, 2010, which is the date the financial statements were
issued.
On
February 28, 2010 we had raised $53,300, which exceeded the minimum amount to be
raised under our Registration Statement Form S-1 that became effective on
December 23, 2009. We deposited the funds in our account within the
terms of our registration statement.
F-11