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, 2012

 

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 ].

 

Indicate by check mark whether the registrant has submitted electronically and posted on its website, if any, every Interactive File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS325.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files), Yes [ ] No [X ]

 

Aggregate market value of the voting stock held by non-affiliates of the registrant as of December 31, 2012: $577,700

 

Shares of common stock outstanding at April 16, 2013:    7,755,400

 

 

 

 

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.

 

 

 

 

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 and at trade shows and other events. We screen print and embroider T-shirts, jackets, hats, caps, pants, sweatshirts, jersey’s, uniforms and even bags.

 

Our principal suppliers are Hypertek, Stanton Wholesale, Checkmate Casuals and Flash Direct. Hypertek and Kolder supply us with koolvest inserts and the actual vests. Stanton Wholesale and Checkmate Casuals supply the company with the Tee Shirt product and other products. Flash Direct supplies us with solutions and ink. 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 1,000 sf office at 7405 Armstrong, Rowlett, Texas. We have no lease commitments as we are on a month to month lease of $1,000 per month which we rent from the President.

 

The Company has performed pad printing, printing anything from pens to USB drives.  We have the capability to do laser engraving to gain a larger market in USB decorating sales.

 

We use cutting edge ink jet technology with a BROTHER GT-541. With this machine we can print on many garments in high quality color directly from a computer – known as “Direct to Garment” printing. This technology came out about six 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.

 

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 and require 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 one-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.

 

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 1,000 sf office space at 7405 Armstrong, Rockwall, Texas, which is in the home of the President. We have no lease commitments as we are on a month to month lease of $1,000 per month.

 

 

ITEM 3.                      LEGAL PROCEEDINGS

 

As of December 31, 2012, the Company is not involved in any legal proceedings.

 

 

ITEM 4.                      MINE SAFETY DISCLOSURES

 

Not applicable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II

 

ITEM 5.                       MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS’  MATTERS

 

Our stock is currently quoted on the Over-The-Counter (OTC) bulletin board under HTEE.OB.

 

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 2012

 

GOING CONCERN:

The Company has minimal operations and has working capital of approximately $20,000 and $55,000 as of December 31, 2012 and December 31, 2011, respectively. Because of this low level of working capital and limited operations, the Company may require additional working capital to survive. The Company raised additional working capital through a private placement in 2010 and intends to raise additional working capital either through further private placements or bank loans or sale of common stock. There are no assurances that the Company will be able to do 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.

 

EXECUTIVE OVERVIEW:

In 2012 we saw improvement in the promotions market place. Our sales increased $13,046 versus 2011 or 22%. The rebound in the economy stimulated small business discretionary spending. The promotional marketplace is very volatile and we continue to see customers come and go. In 2012, our third largest customer was new versus 2011.

 

REVENUE:  Revenue for the year ended December 31, 2012, was $71,288 compared with revenues for the twelve months ended December 31, 2011 of $58,242.  The increase is attributed to customers beginning to spend once more on promotional items and through advertising. We lost our 3^rd and 5^th largest customers from 2011 (combined $6,679) but more than made up for it with one new customer at $15,682. Our top five customers accounted for 84% of sales, or $59,580, in 2012, versus 2011 of

57% or 33,258.

 

COST OF SALES: Cost of sales (COS) were $26,155 (or 37% of revenue) for the year ended December 31, 2012 compared to $34,178 (or 59% of revenue) for the same period in 2011. The decrease in COS by 23% point is due to product mix. In 2011 we sold promotional kool-vests ($21,102 in 2011 versus $5,389 in 2012) that had a higher cost of goods sold percentage than the rest of our business (anywhere from 50-75%). Of the increased sales in 2012, $17,600 were in Pad Printing that has much lower cost of sales as a percentage of sales.

 

OPERATING EXPENSES. Operating expenses, exclusive of depreciation expense of $20,125 and $21,107, were $84,974 and $110,920 for the twelve month periods ended December 31, 2012 and 2011 respectively, a decrease of $25,946.  The decrease in costs were mainly due to reduced expenses in payroll ($13,000 – President taking a lower salary), $6,700 lower net professional fees, and $5,200 of reduced advertising expenses.

 

NET INCOME (LOSS). The Net Loss for the year ended December 31, 2012 and 2011 decreased to ($59,780) from ($107,602). The improvement versus 2011 was due to the explanations as discussed above.

 

 

 

LIQUIDITY AND CAPITAL RESOURCES.  

 

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 $49,575 and $43,476 as of December 31, 2012 and December 31, 2011, respectively, for working capital.  No interest is paid on this advance.  This is also disclosed in Note 6 to the December 31, 2012 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, 2012 were negative $47,495 versus 2011 of negative $48,187.  We anticipate 2013 Cash Flow from Operating Activities to improve.

 

Capital Resources

 

In January 2009, the Company entered into a capital lease commitment that has a term of four 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 commitment of $29,220.  The balance due at December 31, 2012 was $-.

 

Material Changes in Financial Condition

 

WORKING CAPITAL: In the year ended December 31, 2012 working capital decreased by approximately $35,100, to $20,100 versus December 31, 2011.  This decrease is primarily due to a reduction in cash of $43,000, a decrease in accounts payable/accrued expenses of $6,700 and increase in shareholder advances of $6,100.

 

Critical Accounting Policies

 

The Company’s critical accounting policies and estimates are fixed assets, reserve for doubtful accounts and revenue recognition.

 

STOCKHOLDERS’ EQUITY (DEFICIT): Stockholders’ Equity (Deficit) changed by approximately $59,800 in the year ended December 31, 2012 versus December 31, 2011 due to the net loss in the year ended December 31, 2012.  

 

UNUSUAL EVENTS: None.

 

FUTURE FINANCIAL CONDITION: The Company is optimistic about its future and the opportunities ahead.  There are no assurances that the Company will be able to do 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.

 

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 audit. Yorkdale Capital, LLC or its principals are shareholders and were paid $19,750 and $11,490 for services in the years ended December 31, 2012 and 2011, respectively.

 

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 2012 improved as many small businesses again began spending discretionary funds on promotional items. The increased sales in 2012 is due to the economy. There are no current significant seasonal trends in our business that will impact our business quarter-to-quarter.

 

 

New Markets: We continue to 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” which we did not do in 2012 due to lack of working capital.  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.

 

 

 

 

 

 

 

 

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, 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 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, 2012, our Chief Executive and Chief Financial Officer as of December 31, 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 weaknesses in 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.

 

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, 2012.   Based on its evaluation, our management concluded that, as of December 31, 2012, 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 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 and corrected 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.

 

 

PART III

 

ITEM 10.                      DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

 

Name	Age	Position
William Lewis	55	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 2012 and 2011 as cash and non-cash compensation.

 

Name	Capacity Served	Aggregate Remuneration
William Lewis	Chief Executive Officer, Chief Financial Officer,  President, Secretary and Director	2012: $- 2011: $12,960

 

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, 2012 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
Chief Executive Officer, Chief Financial Officer,  President, Secretary and Director	William Lewis	6,450,000	83.2%

 

 

 

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, 2012 $22,255 was accrued for rent expense not yet paid.

·

The Company owes the Company’s President $49,575 as of December 31, 2012 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 2012 was $5,500 and in 2011 was $5,100.

 

(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 was $1,100 per quarter in 2012 and $975 per quarter in 2011.

 

(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).

 

(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.

 

 

 

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, 2012 and 2011

 

Consolidated Statements of Operations for the Years Ended December 31, 2012 and 2011

 

Consolidated Statement of Changes in Stockholders’ Equity(Deficit) for the Years Ended December 31, 2012 and 2011

 

Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011

 

Notes to the Consolidated Financial Statements

 

(b) The Company filed one Form 8-K on October 27, 2011 referencing the appointment of Norma P. Lewis to serve as Secretary of Hall Tees.

 

 

(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.

 

 

 

 

 

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

Chief Executive Officer & Chief Financial Officer

 

Dated: April 16, 2013

 

 

 

 

 

HALL TEES, INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2012

 

CONTENTS

 

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2012 and 2011	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2012 and 2011	F-4
Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2012 and 2011	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011	F-6
Notes to the Consolidated Financial Statements	F-7 to F-11

 

 

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

To the Board of Directors and

Stockholders of Hall Tees, Inc.

 

 

We have audited the accompanying consolidated balance sheets of Hall Tees, Inc. as of December 31, 2012 and 2011, 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, 2012. 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, 2012 and 2011, 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, 2012. 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, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7 to the consolidated financial statements, the Company's limited working capital, operating history and operations raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 7. 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 result should the Company be unable to continue as a going concern.

 

 

/s/ EFP Rotenberg, LLP

 

EFP Rotenberg, LLP

Rochester, New York

April 16, 2013

 

 

 

 

 

HALL TEES, INC. Consolidated Balance Sheets December 31, 2012 and 2011

 

 

		2012				2011
ASSETS
Current Assets
Cash and Cash Equivalents		$	98,435			$	141,106
Accounts Receivable, Net of Allowance for Doubtful Accounts of $2,200 and $4,780			1,799				670
Total Current Assets			100,234				141,776
Fixed Assets, Net of Accumulated Depreciation of $81,850 and $72,025			35,421				60,115
TOTAL ASSETS		$	135,655			$	201,891
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
Current Liabilities
Accounts Payable		$	8,283			$	1,107
Accrued Expenses			22,230				36,117
Amounts due Shareholder			49,575				43,476
Current Portion of Capital Lease			—				5,844
Total Current Liabilities			80,088				86,544
Long Term Liabilities
Capitalized Lease Obligation			—				5,844
Less: Current Portion			—				(5,844	)
Total Long Term Liabilities			—				—
Total Liabilities			80,088				86,544
Stockholders' Equity (Deficit)
Preferred Stock, $.001 par value, 25,000,000 shares authorized,
0 and 0 shares issued and outstanding			—				—
Common Stock, $.001 par value, 50,000,000 shares authorized,
7,755,400 shares issued and outstanding			7,755				7,755
Additional Paid-In Capital			389,945				389,945
Accumulated Deficit			(342,133	)			(282,353	)
Total Stockholders' Equity (Deficit)			55,567				115,347
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)		$	135,655			$	201,891

 

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

 

 

 

 

HALL TEES, INC. Consolidated Statements of Operations For the Years Ended December 31, 2012 and 2011

 

 

 

		2012				2011
REVENUE		$	71,288			$	58,242
COST OF SALES			26,155				34,178
GROSS PROFIT			45,133				24,064
OPERATING EXPENSES
Depreciation			20,125				21,107
Selling and Advertising Expenses			1,487				8,429
Other General Expenses			83,487				102,491
TOTAL OPERATING EXPENSES			105,099				132,027
NET OPERATING LOSS			(59,966	)			(107,963	)
OTHER INCOME (EXPENSE)
Interest Income			186				361
TOTAL OTHER INCOME (EXPENSE)			186				361
NET LOSS BEFORE INCOME TAXES			(59,780	)			(107,602	)
Provision for Income Taxes (Expense) Benefit			—				—
NET LOSS		$	(59,780	)		$	(107,602	)
EARNINGS PER SHARE, Basic and Diluted
Weighted Average of Outstanding Shares			7,755,400				7,624,304
Loss for Common Stockholders		$	(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 Years Ended December 31, 2012 and 2011

 

 

			Common Stock
			Shares				Amount				Paid-In Capital				Retained Earnings (Deficit)				Totals
Stockholders' Equity (Deficit),
January 1, 2011			7,605,400			$	7,605			$	365,095			$	(174,751	)		$	197,949
Common Stock issued for services			150,000				150				24,850								25,000
Net Loss															(107,602	)			(107,602	)
Stockholders' Equity (Deficit),
December 31, 2011			7,755,400			$	7,755			$	389,945			$	(282,353	)		$	115,347
Net Loss															(59,780	)			(59,780	)
Stockholders' Equity (Deficit),
December 31, 2012			7,755,400			$	7,755			$	389,945			$	(342,133	)		$	55,567

 

 

 

 

 

 

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

 

 

 

 

 

 

 

HALL TEES, INC. Consolidated Statements of Cash Flows For the Years Ended December 31, 2012 and 2011

 

 

		2012				2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		$	(59,780	)		$	(107,602	)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation			20,125				21,107
Shares issued for services			—				25,000
Bad Debt Expense			1,487				3,222
Changes in assets and liabilities:
(Increase) / decrease in Accounts Receivable			(2,616	)			(2,779	)
Increase / (decrease) in Accounts Payable			7,176				1,107
Increase in Accrued Expenses			(13,887	)			11,758
Net Cash Used for Operating Activities			(47,495	)			(48,187	)
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of Fixed Assets			4,569				—
Net Cash Provided by Investing Activities			4,569				—
CASH FLOWS FROM FINANCING ACTIVITIES
Capitalized Lease Payments			(5,844	)			(5,844	)
Borrowings from Stockholder			6,099				5,983
Net Cash Provided by Financing Activities			255				139
NET INCREASE IN CASH AND CASH EQUIVALENTS			(42,671	)			(48,048	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			141,106				189,154
CASH AND CASH EQUIVALENTS AT END OF YEAR		$	98,435			$	141,106
SUPPLEMENTAL DISCLOSURES
Cash Paid During the Year for Interest Expense		$	—			$	—
Cash Paid During Year for Taxes Paid		$	—			$	—

 

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

 

 

 

 

 

 

HALL TEES, INC. Notes to the Consolidated Financial Statements December 31, 2012 and 2011

 

 

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.

 

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 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.

 

 

 

 

 

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 $2,200 and $4,780 at December 31, 2012 and 2011 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 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 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, 2012 and 2011 are as follows:

		2012				2011
Furniture & Equipment		$	88,051			$	102,920
Capitalized Leases			29,220				29,220
Gross Fixed Assets			117,271				132,140
Less: Accumulated Depreciation			(81,850	)			(72,025	)
Net Fixed Assets		$	35,421			$	60,115

 

Depreciation expense for the years ended December 31, 2012 and 2011 was $20,125 and $21,107, 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. As of December 31, 2012 the balance of the obligation was $0.

 

The Company leases a 1,000 square foot warehouse space on a month to month basis for $1,000 per month. Rent expense was $12,000 (see Note 6) for the years ended December 31, 2012 and 2011.

 

 

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, 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 December 31, 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 740-10 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, 2012 and 2011 consisted of the following:

 

Deferred tax asset related to:		2012				2011
Prior year		$	64.340			$	43,688
Tax benefit for current year			14,945				20,652
Total deferred tax asset			79,285				64,340
Less: valuation allowance			(79,285	)			(64,340	)
Net deferred tax asset		$	—			$	—

 

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 $342,133 at December 31, 2012, and will expire in 2025 through 2031.

 

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 December 31, 2012.

 

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, 2012 the Company recognized no interest and penalties.

 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

The President, also a Stockholder of the Company, has advanced the Company $49,575 and $43,476 as of December 31, 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 and ending December 31, 2013, the President provides general management services to the Company up to $4,000 per month.  Payroll expense incurred under this contract totaled approximately $- and $12,960 for the years ended December 31, 2012 and 2011, respectively.

 

The Company pays rent of $1,000 per month to the President for warehouse facilities.  Total charges were $12,000 in 2012 and 2011.

 

 

 

NOTE 7– FINANCIAL CONDITION AND GOING CONCERN

 

The Company has minimal operations and has working capital of approximately $20,000 and $55,000 as of December 31, 2012 and December 31, 2011, respectively. Because of this low level of working capital and limited operating history and limited operations, the Company may require additional working capital to survive. The Company raised additional working capital through a private placement and intends to raise additional working capital either through further private placements or bank loans or sale of common stock. There are no assurances that the Company will be able to do 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 84% ($59,580) of the 2012 year-to-date revenues. The table below discloses the largest customers 2012 versus 2011 for the year ended December 31, 2012 and 2011.

 

		YTD 2012 Sales		YTD 2011 Sales
TOP 5 customer		$	%	$	%
Cust 1		19,421	27%	12,626	22%
Cust 2		18,870	27%	9,389	16%
Cust 3		15,682	22%	4,238	7%
Cust 4		3,302	5%	3,745	6%
Cust 5		2,305	3%	3,260	6%
Other		11,708	16%	24,984	43%
TOTAL		71,288	100%	58,242	100%