Form 10-Q Teardroppers, Inc. For: Jun 30
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from ______________ to _____________
Commission file number:
(Name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
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|
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| (Address of principal executive offices) | (Zip Code) |
(Issuer’s telephone number)
_______________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate by check mark whether the registrant
(1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
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There were shares of the registrant’s common stock, $0.001 par value per share, outstanding on August 8, 2022.
THE TEARDROPPERS, INC.
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. Condensed Unaudited Financial Statements
The Teardroppers, Inc.
CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Lease receivable – related parties (current portion) | ||||||||
| Interest receivable – related parties | ||||||||
| Total current assets | ||||||||
| Property & Equipment: | ||||||||
| Cost | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property & Equipment, net | ||||||||
| Lease receivable – related party (net) | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES & STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable – unrelated parties | $ | $ | ||||||
| Accounts payable – related parties | ||||||||
| Customer deposits | ||||||||
| Current portion of notes payable | ||||||||
| Accrued interest – unrelated parties | ||||||||
| Line of credit from related party | ||||||||
| Accrued interest payable – related parties | ||||||||
| Total current liabilities | ||||||||
| Long term liability | ||||||||
| Note payable | ||||||||
| Total Liabilities | ||||||||
| Contingencies and Commitments (Note 10) | ||||||||
| Stockholders' Deficit | ||||||||
| Preferred stock, par value $, authorized shares, issued shares , respectively | ||||||||
| Common stock, par value $, authorized shares issued | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders' Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | $ | ||||||
The accompanying notes are an integral part of the condensed unaudited financial statements.
| 3 |
The Teardroppers, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | ||||||||||||||||
| Lease revenue – unrelated parties | $ | $ | $ | $ | ||||||||||||
| Lease revenue – related parties | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Consulting from related parties | ||||||||||||||||
| Consulting fees – unrelated parties | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense – related parties | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense – unrelated parties | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on sale of asset – related party | ||||||||||||||||
| Interest income - related parties | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Loss Before Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income Tax Provision | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share | ||||||||||||||||
| Basic* | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Fully diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding - Basic | ||||||||||||||||
| Weighted average number of common shares outstanding - Diluted | ||||||||||||||||
The accompanying notes are an integral part of the condensed unaudited financial statements.
| 4 |
The Teardroppers, Inc.
CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(UNAUDITED)
| Common Stock | Additional | Total | ||||||||||||||||||
| Amount | Paid in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | ($.001 Par) | Capital | Deficit | Deficit | ||||||||||||||||
| Balance December 31, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Net loss for the period | – | ( |
) | ( |
) | |||||||||||||||
| Balance March 31, 2022 | ( |
) | ( |
) | ||||||||||||||||
| Net loss for the period | – | ( |
) | ( |
) | |||||||||||||||
| Balance June 30, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Balance December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss for the period | – | ( | ) | ( | ) | |||||||||||||||
| Balance March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||
| Net loss for the period | – | ( | ) | ( | ) | |||||||||||||||
| Balance June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of the condensed unaudited financial statements.
| 5 |
The Teardroppers, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2022 | 2021 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation | ||||||||
| Gain on sale of asset | ( | ) | ||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Increase in interest receivable – related parties | ( | ) | ( | ) | ||||
| Decrease in prepaid expenses | ||||||||
| Decrease in lease receivable – related party | ||||||||
| Increase in other receivable | ( | ) | ||||||
| Increase in accounts payable – unrelated parties | ||||||||
| Increase in accounts payable – related parties | ||||||||
| Increase in accrued interest – related parties | ||||||||
| Decrease in accrued interest – unrelated party | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Purchase of asset | ( | ) | ||||||
| Sale of asset | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash Flows From Financing Activities: | ||||||||
| Repayments on notes payable – related party | ( | ) | ||||||
| Repayments on note payable – unrelated party | ( | ) | ( | ) | ||||
| Principal payments on lease payable | ( | ) | ||||||
| Proceeds from lines of credit – related parties | ||||||||
| Repayments on line of credit related party | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net Increase (Decrease) In Cash | ( | ) | ||||||
| Cash At The Beginning Of The Period | ||||||||
| Cash At The End Of The Period |
$ |
$ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Franchise and income tax | $ | $ | ||||||
The accompanying notes are an integral part of the condensed unaudited financial statements
| 6 |
THE TEARDROPPERS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
On June 3, 2013, Teardroppers, Inc. (the “Company”), was incorporated under the laws of the state of Nevada.
We are in the business of mobile billboard advertising providing billboard advertising space on custom designed “Teardrop Trailers” and various sizes of cargo type trailers. Teardrop Trailers, are usually designed for short-period accommodations for vacationers and travelers. Teardrop Trailers are designed to be towed behind new and vintage vehicles and pickup trucks.
In addition, we own cargo trailers with flat non rivet panel siding that can be used for hauling and transportation. These trailers range in size from 15 feet to 53 feet. We lease these trailers for transportation of goods and for advertising of their respective business or the businesses of lessee clients.
On June
13, 2022, (the “Company”) filed with the Secretary of State of the State of Nevada a Certificate of Change, pursuant to Nevada
Revised Statutes 78.209, to (i) effect a
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. Operating results for the six months ended June 30, 2022 is not necessarily indicative of the final results that may be expected for the year ended December 31, 2022. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2021 filed with the SEC on April 15, 2022.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Such estimates include management’s assessments of the carrying value of certain assets, lease liabilities, useful lives of assets and related depreciation, and valuation of deferred tax assets.
Cash equivalents
The Company considers all highly liquid investments
with an original maturity of three months or less when purchased to be cash equivalents. At June 30, 2022 and December 31, 2021, the Company
had
Fair value of financial instruments
The Company adopted the provisions of FASB Accounting Standards Codification (“ASC”) 820 (the “Fair Value Topic”) which defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements.
| 7 |
THE TEARDROPPERS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
The Fair Value Topic defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. It also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels.
The carrying amount of the Company’s financial assets and liabilities, such as cash, lease receivable, accounts payable, and accrued expenses, approximate their fair value because of the short maturity of those instruments. The Company’s loans payable approximates, the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at June 30, 2022 and December 31, 2021.
The Company had
Property and equipment
Property and equipment are recorded at cost. Expenditures
for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed
by the straight-line method over the assets estimated useful life of three (
Revenue recognition
On January 1, 2018, the Company adopted the provisions of ASC 606 Revenue from Contracts with Customers, and related Accounting Standards Updates. This new revenue recognition standard has a five step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied. The impact of the Company’s initial application of ASC 606 did not have a material impact on its financial statements and disclosures.
The primary source of revenue and performance
obligation is from the rental of advertising space on custom designed Teardrop Trailers. The length of the rental agreements varies from
one to thirty days. Customers pay in advance and revenue is recognized based on the number of days of each contract that have expired.
For the three and six months ended June 30, 2022 and 2021, the Company recognized
In January 2019, the Company entered into a two-year
agreement to lease a vehicle to an unrelated third party. For the six months ended June 30, 2022 and 2021, recognized operating lease
income of $
On February 1, 2020, the Company leased a truck
and trailer purchased November 2019 for $190,000 to a related party. The lease is classified as a direct financing lease. The cost of
the vehicle and related accumulated depreciation has been reclassified to a lease receivable and is reflected on the condensed balance
sheet as lease receivable – related party. Interest revenue is reflected on the condensed statement of operations. For the three
months ended June 30, 2022 and 2021, the Company recognized interest income of $
| 8 |
THE TEARDROPPERS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
On September 1, 2020, the Company leased a vehicle
for $69,000 to a related party. The lease is classified as a direct financing lease. The lease is reflected on the condensed balance
sheet as lease receivable – related party. Interest revenue is reflected on the condensed statement of operations. For the three
months ended June 30, 2022 and 2021, the Company recognized interest revenue of $
In January 2015, the Company received $14,500 as a deposit for advertising space to be provided in the future. As of March 31, 2022 and December 31, 2021, the customer has not utilized the space and no revenue has been recognized as the performance obligations have not been satisfied. At the time the service is provided under the terms of the agreement, the Company will recognize the revenue.
The Company computes basic and diluted earnings per share amounts pursuant to ASC 260-10-45. Basic earnings per share is computed by dividing net income (loss) available to common shareholders, by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share is computed by dividing net income (loss) available to common shareholders by the diluted weighted average number of shares of common stock during the period
The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day of the year for any potentially diluted debt or equity.
There were potentially dilutive shares outstanding as of June 30, 2022 and December 31, 2021, respectively.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 – GOING CONCERN
The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company has a minimum cash balance available
for payment of ongoing operating expenses. As of June 30, 2022, the Company has an accumulated deficit of $
| 9 |
THE TEARDROPPERS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
NOTE 4 – LEASE RECEIVABLE – RELATED PARTY
On November 12, 2019, the company purchased a
truck and trailer from a related party for $190,000. On February 1, 2020, the Company leased the asset back to the same related party.
The term of the lease is for
The undiscounted cash flow principal payments for the remaining term of the lease will be as follows:
| 2022 (remainder of year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| Total | ||||
| Less deferred interest | ( | ) | ||
| Less current portion | ( | ) | ||
| Long-term lease receivable | $ |
On August 1, 2020, the company purchased a vehicle
for $69,000 from a related party and leased it to the same related party. The term of the lease is for
The undiscounted cash flow principal payments for the remaining term of the lease will be as follows:
| 2022 (remainder of year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Purchase option | ||||
| Total | ||||
| Less deferred interest | ( | ) | ||
| Less current portion | ( | ) | ||
| Long-term lease receivable | $ |
| 10 |
THE TEARDROPPERS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
Income from both leases is reflected on the statement
of operations as interest income – related parties. For the three months ended June 30, 2022 and 2021 interest income of $
NOTE 5 – PROPERTY & EQUIPMENT
Property and equipment consists of the following at June 30, 2022 and December 31, 2021.
| June 30, 2022 | December 31, 2021 | |||||||
| Property and equipment, purchased | $ | $ | ||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense for the three months ended
June 30, 2022 and 2021 was $
On April 2, 2021, the Company sold a NASCAR hauler to a related party
at a gain of $
NOTE 6 – LINE OF CREDIT FROM RELATED PARTY
On February 25, 2014, the Company entered into
a line of credit with DEVCAP Partners, LLC, a California limited liability company (“DEVCAP”), for an amount up to $
On August 13, 2015, the Company entered into a
line of credit with General Pacific Partners, LLC, a California limited liability company, for an amount up to $
During 2014, the Company entered into a line of
credit agreement with Gemini Southern, LLC, a related party. The line of credit is a demand loan with a maximum of $
| 11 |
THE TEARDROPPERS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
NOTE 7 – LONG-TERM LIABILITIES
On August 1, 2020, the Company borrowed $
Principal payments for the next four years will be as follows:
| 2022 (remainder of year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Total | ||||
| Less current portion | ( |
) | ||
| Long-term liability | $ |
NOTE 8 – OTHER RELATED PARTY TRANSACTIONS and RELATED PARTIES ACCOUNTS PAYABLE
Note payable – Gemini Southern, LLC
During 2014, the Company entered into a loan agreement
with Gemini Southern, LLC, pursuant to which monies were to be paid to the Company by Gemini Southern, LLC, pursuant to the Consulting
Agreement dated September 20, 2013. The balance was to be paid with interest commencing January 1, 2015 at a rate of 10% per annum, with
a maturity date of December 12, 2018. On April 1, 2018, the balance of the debt, $525,000, was converted into 4,375,000 shares of common
stock of the Company, valued at $0.12 per share. The Company recorded accrued interest on this loan of $
Line of credit from related parties
The Company has two line of credit agreements with related parties. FinTekk AP, LLC is also the majority shareholder in the Company. DEVCAP Partners, LLC is owned by the same related party that owns Fintekk AP. See Note 6 for further disclosure.
Consulting expense to related party (FinTekk AP, LLC)
On January 1, 2014, the Company executed a three-year
consulting agreement with DEVCAP Partners, LLC, (“DEVCAP”), whereby the Company agreed to pay approximately $
| 12 |
THE TEARDROPPERS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
Consulting expense to related party (Ray Gerrity)
On January 1, 2014, the Company entered into a verbal consulting agreement with its Chief Executive Officer, Ray Gerrity, whereby the Company agreed to pay $2,500 per quarter for consulting services related to his duties as Chief Executive Officer. Mr. Gerrity resigned his position effective March 31, 2018. The amount due but unpaid was $32,500 at June 30, 2022 and December 31, 2021, respectively, and was included on the balance sheet as accounts payable - related parties.
Consulting expense to related party (Robert Wilson)
On January 1, 2014, the Company entered into a
verbal consulting agreement with its Chief Financial Officer, Robert Wilson, whereby the Company agreed to pay $2,500 per quarter for
consulting services related to his duties as Chief Financial Officer. Mr. Wilson resigned effective April 1, 2017. The amount due but
unpaid was $
Consulting expense to related party (Cody Ware)
On January 1, 2019, the Company entered into a
consulting agreement with its Chief Executive Officer, Cody Ware, whereby the Company agreed to pay $1,500 per month for consulting
services related to his duties as Chief Executive Officer. Effective July 2020, the amount was increased to $4,500 per month. For the
three and six months ended June 30, 2022 and 2021, the Company recorded consulting fee expense of $
Expense reimbursements
The majority shareholder of the Company pays certain ongoing operating costs from personal funds and is periodically reimbursed. As of June 30, 2022 and December 31, 2021, the amounts due to the shareholder was $ and $, respectively and is reflected in accounts payable – related parties on the balance sheet.
Other related party transactions
On February 4, 2021, the Company purchased a 1983 Toyota truck from the majority shareholder for use in the business operations.
NOTE 9 – STOCKHOLDERS’ DEFICIT
At the time of incorporation, the Company was authorized to issue 10,000 shares of common stock and 1,000 shares of preferred stock with a par value of $. The Company amended its articles of incorporation to increase it authorized shares to shares of common stock and shares of preferred stock, both $0.001 par value.
NOTE 10 – CONTINGENCIES AND COMMITMENTS
The Company’s ability to collect on receivables and pay liabilities is connected to NASCAR race schedule. The 2020 and 2021 NASCAR schedules were severely disrupted by Covid, which caused delays in both collections and payments. Management believes the 2022 NASCAR schedule will not be disrupted. This will allow collections on receivables and payments on liabilities to be timely made. There are no other commitments or contingencies related to the assets and liabilities that are not disclosed above.
| 13 |
THE TEARDROPPERS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
NOTE 11 – SUBSEQUENT EVENTS
On July 1, 2022, the Company borrowed $649,000 for 48 months amortized at (12%) twelve percent interest from Gemini Southern, LLC. Monthly loan payments are $17,091 per month. On July 5, 2022, the Company used the loan proceeds from the loan to acquire two (2) motorsport style haulers and two (2) over the road trucks for $649,000 to be used in our business.
The COVID-19 outbreak in 2020 had a significant impact on business in general. The NASCAR race schedule was severely disrupted. The Company’s operations are directly connected to the NASCAR schedule. Due to the disruption in NASCAR events, collection of revenues and payment of expenses was delayed in some cases. Revenues declined significantly in 2021 versus 2020. Expenses for 2021 were consistent with prior periods. The Company did not experience a significant detrimental change. Management believes the 2022 NASCAR race schedule will not be significantly impacted and should not have a material impact on future operations. Due to the level of risk this virus may have on the global economy, it is at least reasonably possible that it could have an impact on the operations of the Company in the near term that could materially impact the Company’s financials.
On July 5, 2022, the Company entered into a lease agreement with Rick Ware Racing, LLC, a current related party client. The lease agreement pertains to two (2) motorsports type haulers and two (2) over the road trucks. The lease payments are due monthly at $17,250 per month for forty eight (48) months. Rick Ware Racing is responsible for all insurance and maintenance of the equipment. There is no option for a term ending purchase by the lessee.
| 14 |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Safe Harbor for Forward-Looking Statements
When used in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position. Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual result may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed under the “Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operations,” and also include general economic factors and conditions that may directly or indirectly impact the Company’s financial condition or results of operations.
Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021
Revenues
The Company had no revenue during the three months ended June 30, 2022 compared to $1,275 in revenue during the three months ended June 30, 2021. This decrease is the result of no consulting fees received and delayed lease revenue payments received from related parties.
Operating Expenses
For the three months ended June 30, 2022 operating expenses were $77,528 compared to $98,553 for the same period in 2021 for a decrease of $21,025. The decrease was primarily a result of the decrease in consulting fees to related parties to $36,000 from $51,000, accompanied by a decrease in general and administrative fees to $27,228 from $31,853, and a decrease in consulting fees to unrelated parties to $5,000 from $10,000.
Other income (expense) was $25,070 for the three months ended June 30, 2022 compared to $3,568 for the three months ended June 30, 2021. The decrease was due to a gain on sale of asset and the cessation of interest accruals on the asset for the three months ended June 30, 2021.
Net Loss
The Company incurred losses of $102,598 for the three months ended June 30, 2022 compared to $93,710 during the three months ended June 30, 2021 due to the factors discussed herein above.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
Revenues
The Company had no revenue during the six months ended June 30, 2022 compared to $14,550 in revenue during the six months ended June 30, 2021. This decrease is the result of no consulting fees received from related party and lease expiration.
Operating Expenses
For the six months ended June 30, 2022 operating expenses were $180,827 compared to $230,342 for the same period in 2021 for a decrease of $49,515. The decrease was primarily a result of the decrease in general and administrative fees to $65,834 from $87,029, a decrease in consulting to related parties to $79,500 from $87,000, and a decrease in consulting to unrelated parties to $10,000 from $32,500 for the same period in 2021.
Other income (expense) was $48,804 for the six months ended June 30, 2022 compared to $13,668 for the six months ended June 30, 2021. The decrease was due to the gain on sale of asset and the cessation of interest accruals on the asset.
| 15 |
Net Loss
The Company incurred losses of $229,631 for the six months ended June 30, 2022 compared to $229,460 during the six months ended June 30, 2021 due to the factors discussed herein above.
Operating activities
During the six months ended June 30, 2022, we had $61,812 cash used in operating activities compared to $125,092 during the six months ended June 30, 2021, a decrease in cash outflows of $63,280. The decrease in operating activities was due to a decrease to payables and accrued interest.
Investing activities
We generated no cash from investing activities during the six months ended June 30, 2022 and $38,982 during the six months ended June 30, 2021. The increase in cash generated by investing activities was due to the sale of an asset.
Financing activities
During the six months ended June 30, 2022, we generated $67,776 from financing activities compared to $45,221 for the same period ended June 30, 2021. The increase was primarily due to a reduction in repayments to related parties on lines of credit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company has a minimum cash balance available for payment of ongoing operating expenses and has incurred losses since inception and anticipates future losses in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. Its continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available or will be available on terms acceptable to the Company.
The Company had $35,122 in cash at June 30, 2022 with availability on our related party lines of credit with FinTekk AP, LLC and General Pacific Partners of $662,371. At June 30, 2022 we had a working capital deficit of $2,372,774.
| 16 |
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company,” we are not required to provide the information under this Item 3.
ITEM 4. Controls and Procedures
Evaluation of disclosure controls and procedures
Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our Chief Executive Officer as of the end of the period covered by this report, our Chief Executive Officer concluded that our disclosure controls and procedures have not been effective as a result of a weakness in the design of internal control over financial reporting identified below.
As used herein, “disclosure controls and procedures” mean controls and other procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act 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 us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s 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 Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of 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 and directors 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.
This report does not include an attestation report of our registered independent public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered independent public accounting firm.
Changes in Internal Control Over Financial Reporting
No changes in our internal control over financial reporting occurred during the period ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 17 |
PART II – OTHER INFORMATION
ITEM 1. Legal Proceedings
We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or material pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the six months ended June 30, 2022, the Company had no unregistered sales of equity securities.
ITEM 3. Default Upon Senior Securities
During the six months ended June 30, 2022, the Company had no senior securities issued and outstanding.
ITEM 4. Mine Safety Disclosures
Not applicable to our Company.
ITEM 5. Other Information
On June 13, 2022, (the “Company”) filed with the Secretary of State of the State of Nevada a Certificate of Change, pursuant to Nevada Revised Statutes 78.209, to (i) effect a one-for-250 reverse stock split (the “Reverse Split”) of the Company’s issued and outstanding common stock, par value $0.001 per share, on July 6, 2022 at 8:00 A:M Eastern Time (the “Effective Time”). The total number of shares of common stock that the Company shall have the authority to issue will remain at 200,000,000. As a result of the one-for-250 reverse stock split (the “Reverse Stock Split”), at the Effective Time, each 250 shares of the Company’s common stock issued and outstanding immediately prior to the Effective Time was automatically combined into and become one share of Company common stock. Fractional shares resulting from the reverse stock split were settled by cash payments. As of July 6, 2022, the total amount of common shares outstanding of the Company was 183,680.
ITEM 6. Exhibits
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K
| SEC Ref. No. | Title of Document | |
| 31.1* | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of the Principal Executive Officer pursuant to U.S.C. pursuant to Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification of the Principal Financial Officer pursuant to U.S.C. pursuant to Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). |
__________
* Filed herewith.
| 18 |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE TEARDROPPERS, INC.
August 15, 2022
By: /s/ Rayna Austin
Rayna Austin
Chief Financial Officer (Principal Financial Officer)
| 19 |
Exhibit 31.1
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Cody Ware, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of The Teardroppers, Inc. for the quarter ended June 30, 2022.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
August 15, 2022
/s/ Cody Ware
Name: Cody Ware
Its: Chief Executive Officer (Principal Executive Officer)
Exhibit 31.2
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Rayna Austin, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of The Teardroppers, Inc. for the quarter ended June 30, 2022.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
August 15, 2022
/s/ Rayna Austin
Name: Rayna Austin
Its: Principal Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Teardroppers, Inc. (the “Company”) on Form 10-Q, for the quarter ended June 30, 2022 as filed with the Securities and Exchange Commission, I, Cody Ware, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
August 15, 2022
/s/ Cody Ware
Name: Cody Ware
Its: Chief Executive Officer (Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Teardroppers, Inc. (the “Company”) on Form 10-Q, for the quarter ended June 30, 2022 as filed with the Securities and Exchange Commission, I, Rayna Austin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
August 15, 2022
/s/ Rayna Austin
Name: Rayna Austin
Its: Chief Financial Officer (Principal Financial Officer)
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