SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

(Mark One)

 

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2012

 

OR

 

[    ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

 

From the transition period from ___________ to ____________.

 

Commission File Number 333-150829

 

HALL TEES, INC.

(Exact name of small business issuer as specified in its charter)

 

Nevada	26-0875401
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

 

7405 Armstrong, Rowlett, Texas 75088

(Address of principal executive offices)

 

  (214) 883-0140

(Issuer's telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:.  Yes [ X ]   No [     ].

 

Indicate by check mark whether the Registrant is a large accredited filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accredited filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

	Large Accredited Filer	[   ]	Accelerated Filer	[   ]
	Non-Accredited 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  ].

 

As of November 14, 2012, there were 7,755,400 shares of Common Stock of the issuer outstanding.

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

	PART I FINANCIAL STATEMENTS
Item 1	Financial Statements (Unaudited)	3
Item 2	Management's Discussion and Analysis or Plan of Operation	11
Item 3	Quantitative and Qualitative Disclosures about Market Risk	13
Item 4	Controls and Procedures	13
	PART II OTHER INFORMATION
Item 4	Mine Safety Disclosures	14
Item 6	Exhibits and Reports on Form 8-K	14

 

 

 

 

 

 

 

  

 

HALL TEES, INC. Consolidated Balance Sheets September 30, 2012 and December 31, 2011 (Unaudited)

  

		2012				2011
ASSETS
Current Assets
Cash and Cash Equivalents		$	100,106			$	141,106
Accounts Receivable, Net			253				670
Total Current Assets			100,359				141,776
Fixed Assets, Net			40,101				60,115
TOTAL ASSETS		$	140,460			$	201,891
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable		$	0			$	1,107
Accrued Expenses			24,758				36,117
Amounts due Shareholder			47,575				43,476
Capitalized Lease Obligation			1,461				5,844
Total Current Liabilities			73,794				86,544
Total Liabilities			73,794				86,544
Stockholders' Equity
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,
7,755,400 and 7,755,400 shares issued and outstanding			7,755				7,755
Additional Paid-In Capital			389,945				389,945
Accumulated Deficit			(331,034	)			(282,353	)
Total Stockholders' Equity			66,666				115,347
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	140,460			$	201,891

 

The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.

 

  

  

 

HALL TEES, INC. Consolidated Statements of Operations For the Three and Nine Months ended September 30, 2012 and 2011

(Unaudited)

 

		Three Months Ended								Nine Months Ended
		September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
REVENUE		$	28,400			$	33,322			$	53,505			$	50,092
COST OF SALES			14,206				17,851				24,835				29,235
GROSS PROFIT			14,194				15,471				28,670				20,857
OPERATING EXPENSES
Depreciation			5,110				5,260				15,446				15,882
Selling and Advertising Expenses			890				3,804				1,406				6,867
Other General Expenses			21,980				23,136				60,649				60,622
TOTAL OPERATING EXPENSES			27,980				32,200				77,501				83,371
NET OPERATING LOSS			(13,786	)			(16,729	)			(48,831	)			(62,514	)
OTHER INCOME
Interest Income			47				85				150				299
TOTAL OTHER INCOME			47				85				150				299
NET LOSS BEFORE INCOME TAXES			(13,739	)			(16,644	)			(48,681	)			(62,215	)
Provision for Income Taxes (Expense) Benefit			—				—				—				—
NET LOSS		$	(13,739	)		$	(16,644	)		$	(48,681	)		$	(62,215	)
EARNINGS PER SHARE, Basic and Diluted
Weighted Average of Outstanding Shares			7,755,400				7,605,400				7,755,400				7,605,400
Income (Loss) for Common Stockholders		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.01	)

 

The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.

 

 

 

 

HALL TEES, INC. Consolidated Statement of Changes in Stockholders’ Equity(Deficit) For the Nine Months ended September 30, 2012 and The Year Ended December 31, 2011 (Unaudited)

  

			Common Stock								Paid-In				Accumulated
			Shares				Amount				Capital				(Deficit)				Totals
Stockholders' Deficit,
January 1, 2011			7,605,400			$	7,605			$	365,095			$	(174,751	)		$	197,949
Issuance of Stock for Services			150,000				150				24,850				—				25,000
Net Loss															(107,602	)			(107,602	)
Stockholders' Deficit,
December 31, 2011			7,755,400			$	7,755			$	389,945			$	(282,353	)		$	115,347
Net Loss															(48,681	)			(48,681	)
Stockholders' Deficit,
September 30, 2012			7,755,400			$	7,755			$	389,945			$	(331,034	)		$	66,666

 

 

 

 

 

 

The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.

 

 

 

 

 

 

  

HALL TEES, INC. Consolidated Statements of Cash Flows For the Nine Months ended September 30, 2012 and 2011

(Unaudited)

 

		2012				2011
CASH FLOWS USED BY OPERATING ACTIVITIES
Net Loss		$	(48,681	)		$	(62,215	)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation			15,446				15,882
Bad Debt Expense			1,406				1,442
Changes in assets and liabilities:
Accounts Receivable			(989	)			(4,747	)
Accounts Payable			(1,107	)			2,500
Accrued Expenses			(11,359	)			9,337
Net Cash Used by Operating Activities			(45,284	)			(37,801	)
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of Fixed Assets			4,568				0
Net Cash Provided by Investing Activities			4,568				0
CASH FLOWS FROM FINANCING ACTIVITIES
Capitalized Lease Payments			(4,383	)			(4,383	)
Borrowings: Stockholder Advances			4,099				4,983
Net Cash Provided (Used) by Financing Activities			(284	)			600
NET DECREASE IN CASH AND CASH EQUIVALENTS			(41,000	)			(37,201	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			141,106				189,154
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	100,106			$	151,953
SUPPLEMENTAL DISCLOSURES
Cash Paid During the Year for Interest Expense		$	—			$	—
Cash Paid During the Year for Taxes		$	—			$	—

 

The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.

 

 

  

HALL TEES, INC.

NOTES TO FINANCIAL STATEMENTS

September 30, 2012

 

  

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.

 

Unaudited Interim Consolidated Financial Statements:

 

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable Securities and Exchange Commission (“SEC”) regulations for interim financial information. These consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to present fairly the balance sheets, statements of operations and statements of cash flows for the periods presented in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. It is presumed that users of this interim financial information have read or have access to the audited financial statements and footnote disclosure for the preceding fiscal year contained in the Company’s Annual Report on Form 10-K filed with the SEC on April 5, 2012. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

 

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 consolidated 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.

 

Management believes that all adjustments necessary for a fair statement of the results of the nine months ended September 30, 2012 and 2011 have been made.

 

 Basis of Presentation:

 

The Company prepares its consolidated 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 $3,890 and $4,780 at September 30, 2012 and December 31, 2011 respectively.  Write offs are recorded at a time when a customer receivable is deemed uncollectible and during the nine months ended September 30, 2012 the Company wrote-off $2,295.

 

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, are capitalized and included in fixed assets.

 

Revenue Recognition:

 

The Company recognizes revenue in accordance with ASC 605-10. 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.

 

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.

 

Estimates:

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 September 30, 2012 and December 31, 2011 are as follows:

		2012				2011
Furniture & Equipment		$	95,086			$	102,920
Capitalized Leases			29,220				29,220
Gross Fixed Assets			124,306				132,140
Less: Accumulated Depreciation			(84,205	)			(72,025	)
Net Fixed Assets		$	40,101			$	60,115

 

  

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 amount due by December 31, 2012 is $1,461. The total amount outstanding at December 31, 2011 was $5,844.

 

Accumulated depreciation related to the capitalized leases for the periods ended September 30, 2012 and 2011 was $7,007 and $6,507, respectively.

 

The Company leases a 1,200 square foot warehouse space on a month to month basis for $1,000 per month. Rent expense was $3,000 for the three month periods ended September 30, 2012 and 2011 and was $9,000 for the nine month periods ended September 30, 2012 and 2011.

 

NOTE 4 – EQUITY

 

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 September 30, 2012 and December 31, 2011, 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 September 30, 2012 and December 31, 2011, there were 7,755,400 shares outstanding respectively.

 

The Company does not have any stock option plans or warrants. 

 

 

 NOTE 5 – INCOME TAXES

 

The Company has adopted ASC 740, 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 September 30, 2012 and December 31, 2011 consisted of the following:

 

		2012				2011
Deferred Tax Asset		$	76,500			$	64,340
Less: Valuation Allowance			(76,500	)			(64,340	)
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 $331,034 at September 30, 2012 and $282,353 at December 31, 2011, and will expire in 2030.

 

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 2012 and 2011 is attributable to the valuation allowance.

 

The realization of deferred tax benefits is contingent upon future earnings, therefore, is fully reserved at September 30, 2012 and December 31, 2011.

 

 

The Company recognizes interest and penalties related to unrecognized tax benefits in general and administrative expense. During the nine months ended September 30, 2012 and the year ended December 31, 2011 the Company recognized no interest and penalties.

 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

The President and a Stockholder of the Company has advanced the Company $47,575 and $43,476 as of September 30, 2012 and December 31, 2011, respectively, for working capital. No interest is paid on this advance.

 

Under a contract with the Company beginning November 6, 2007, originally expiring December 31, 2012 and updated to end December 31, 2013, the President provides general management services to the Company for up to $4,000 per month.  Payroll expense incurred under this contract totaled approximately $0 and $4,800 for the three months ended September 30, 2012 and 2011, respectively and approximately $0 and $9,760 for the nine months ended September 30, 2012 and 2011, respectively.

 

The Company pays rent of $1,000 per month to the President for warehouse facilities.  Total charges were $3,000 in each of the three months ended September 30, 2012 and 2011 and $9,000 in each of the nine months ended September 30, 2012 and 2011.

 

 

NOTE 7– FINANCIAL CONDITION AND GOING CONCERN

 

The Company has minimal operations and has working capital of approximately $26,565 at September 30, 2012 and $55,200 as of December 31, 2011. This positive working capital at September 30, 2012 is a result of raising $302,700 under the Form S-1/A that was filed on December 7, 2009 and became effective on December 23, 2009.  Without this money the working capital at September 30, 2012 would have been negative.  Because of this negative amount and limited operating history and limited operations, the Company may require additional working capital to survive. If the funds the Company has are not sufficient it will also consider bank loans or additional shareholder loans. There are no assurances that the Company will be able to obtain any 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 – REVENUE CONCENTRATION

 

The Company’s five largest customers account for 75% ($40,321) of the 2012 year-to-date revenues. The table below discloses the largest customers 2012 versus 2011 for the nine months ended September 30, 2012 and 2011 (note: comparison of largest customers year-over-year).

 

		YTD 2012 Sales		YTD 2011 Sales
TOP 5 customer		$	%	$	%
Cust 1		15,682	29%	8,060	16%
Cust 2		13,671	26%	7,873	16%
Cust 3		7,207	13%	4,238	8%
Cust 4		2,305	4%	3,745	7%
Cust 5		1,456	3%	2,934	6%
Other		13,184	25%	23,242	47%
TOTAL		53,505	100%	50,092	100%

 

 

 

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS

 

This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company’s actual results could differ materially from those set forth on the forward looking statements as a result of the risks set forth in the Company’s filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.

 

General

 

In the first nine months of 2012 top line revenue increased 7% to $53,505. North Texas experienced a mild winter in 2012 versus a cold and wet winter in 2011 With the economy still sputtering and with Companies closely managing marketing spending we anticipate flat revenue versus 2011.

 

 

RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012

 

Our quarter ended on September 30, 2012.  Any reference to the end of the fiscal quarter refers to the end of the third quarter for the period discussed herein.

 

REVENUE.  Revenue for the three months ended September 30, 2012 was $28,400 compared to $33,322 for the three month period ended September 30, 2011.  Revenue decreased $4,922 or 15% and the decrease is attributed to lower sales of Kool-Vests ($3,100) versus 2011.

 

Revenue for the nine months ended September 30, 2012 was $53,505 compared to $50,092 for the nine month period ended September 30, 2011.  Revenue increased $3,413 or 7% and the increase is attributed to significant sales growth at one customer ($15,700) versus 2011 and partially offset by the lower Kool-Vest sales ($3,700). We had one large repeat customer year-over-year that accounted for 29% and 16% of revenue in 2012 and 2011, respectively.

 

COST OF SALES: Cost of sales (COS) were $14,206 (or 50% of revenue) for the three months ended September 30, 2012 compared to $17,851 (or 54% of revenue) for the same period in 2011.  The decrease in COS is due to product mix as sales were geared toward higher margin products.

 

Cost of sales (COS) were $24,838 (or 46% of revenue) for the nine months ended September 30, 2012 compared to $29,235 (or 58% of revenue) for the same period in 2011.  The decrease in COS is due to product mix as sales were geared toward higher margin products.

 

OPERATING EXPENSES. Operating expenses, exclusive of depreciation expense of $5,110 and $5,260, were $22,870 and $26,940 for the three month periods ended September 30, 2012 and 2011 respectively.  The lower expenses were due to reductions in advertising, $2,000, and auto expenses, $2,000.

 

Operating expenses, exclusive of depreciation expense of $15,446 and $15,882, were $62,055 and $67,489 for the nine month periods ended September 30, 2012 and 2011 respectively.  The Company paid $18,000 in business development consulting and marketing fees an increase of $14,000 versus 2011. This increase was more than offset by a decrease in auto expense $5,000, payroll expenses $10,000 and advertising $5,000.

 

NET LOSS. The Net Loss for the three months ended September 30, 2012 and 2011 was $13,739 versus $16,644 and $48,681 and $62,215 for the nine months ended September 30, 2012 and 2011, respectively.  The main driver behind the increase in the net loss was the low level of sales as discussed above and the increased operating expenses.  

 

 

 

 

 

LIQUIDITY AND CAPITAL RESOURCES.

 

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 $47,575 and $43,476 as of September 30, 2012 and December 31, 2011, respectively, for working capital.  No interest is paid on this advance.  This is also disclosed in Note 6.

 

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 operations for the three months ended September 30, 2012 was approximately negative $40,700.  The Company continually is seeking new opportunities to spur sales and increase top line revenue.

 

The Company has raised $302,700 by selling 605,400 shares at $0.50 per share since inception.

 

Going Concern

 

Our independent auditors included a going concern explanatory paragraph in their report included in our annual report on Form 10-K for the year ended December 31, 2011, which raises substantial doubt about our ability to continue as a going concern. See Note 7.

 

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 September 30, 2012 was $1,461 and at December 31, 2011 was $5,844.  The balance will paid by December 31, 2012.

 

We do not expect any significant change to our equity or debt structure and do not anticipate entering into any off-balance sheet arrangements.

 

Material Changes in Financial Condition

 

WORKING CAPITAL: Working Capital decreased by approximately $28,700 to $26,600 since December 31, 2011.  This decrease is due to the reduction in cash of about $41,000 and offset by a reduction in accrued expenses of $11,400.

 

SHAREHOLDERS’ EQUITY: Shareholders’ Equity decreased by approximately $48,681 due to the net loss.   

 

Management Advisors

Yorkdale Capital, LLC advises and assists the President with many aspects related to the regulatory filings including assistance with the consolidation of financial statements for the quarterly reviews and year-end audit.  Yorkdale Capital, LLC or its principals are also shareholders.

  

 

 

Item 3: Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

 

Item 4. 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 September 30, 2012.  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.

 

Based upon an evaluation conducted for the period ended September 30, 2012, our Chief Executive and Chief Financial Officer as of September 30, 2012 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 weakness of our internal controls:

 

•

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.

 

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-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

 

PART II

 

Items No. 1, 2, 3, 4, 5 - Not Applicable.

 

 

Item No. 6 - Exhibits and Reports on Form 8-K

 

None noted

 

(b)

Exhibits

 

 

Exhibit Number		Name of Exhibit
31.1	Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

SIGNATURES

 

In accordance with 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.

 

HALL TEES, INC.

 

By /s/ William Lewis

William Lewis, President, CFO

 

Date: November 14, 2012