ITEM 1 - BUSINESS
The Company
The Teardroppers, Inc. is a Nevada corporation which was formed in June of 2013. We commenced operations in February of 2014. It is controlled by Kevin P. O’Connell. Mr. O’Connell owns a majority interest in FinTekk AP, LLC. FinTekk AP, LLC, which owns approximately seventy-eight (70%) of our outstanding shares of common stock. On February 26, 2019, DEVCAP Partners, LLC, which is also controlled by Kevin O’Connell, had transferred all of the Company shares owned by DEVCAP Partners, LLC to FinTekk AP, LLC. We have incurred losses of $2,496,953 from inception through December 31, 2020. Our auditor's report has expressed substantial doubt about our ability to continue as a going concern.
In February of 2014, the Company established a $450,000 unsecured line of credit with DEVCAP. The Company’s liability to DEVCAP has been assigned to FinTekk.. The terms of the Line of Credit provide for interest at 10% per annum on all outstanding balances; quarterly interest payments on outstanding balances are due at the end of each quarter respectively. The availability of funds for draw down from this line of credit is subject to the approval of Mr. O’Connell. At December 31, 2020, we had outstanding $226,385 on the Line of Credit.
Management estimates that the cost of operating our business for the next 12 months will require additional capital of $400,000 or approximately $33,333 per month, consisting of: $10,000 for officers’ salaries, $5,000 for executive marketing assistants, $1,500 for additional office space, $1,500 for telecom and communications, $12,667 for marketing efforts, $3,000 for legal and accounting costs.
In the event that demand for our advertising services increases beyond our ability to pay for additional trailers, of which there can be no assurance, we may seek to have independent or related parties purchase trailers. Such parties may then either lease the trailers to us, or, for a fee, have us act as their agent in maintaining their trailers and obtaining advertising clients for their trailers. In addition to our advertising business, we have acquired trailer and truck assets. These assets have been leased to our customers directly.
There can be no assurance that we will be able to raise any or all of the capital required. These factors indicate that we may be unable to continue as a going concern, particularly in the event that we cannot generate sufficient cash flow or raise sufficient capital to conduct our operations. Our financial statements do not include any adjustments to the value of our assets or the classification of our liabilities that might result if we would be unable to continue as a going concern.
Meeting our capital requirement will be directly contingent on Mr. O’Connell and his decision to have FinTekk advance us capital in the event that we are not able to raise capital from other sources.
The Company and its affiliates and promoters have no plans or intentions to engage in a merger or acquisition with an unidentified company or person or, once it is a reporting company, to be used as a vehicle for a private company to become a reporting company.
The Mobile Billboard Advertising Service
We are currently engaged in the business of mobile outdoor billboard advertising, by offering to provide advertising space on custom designed and manufactured “Teardrop Trailers” and standard cargo trailers purchased from independent trailer manufacturers of various sizes. Teardrop Trailers are usually designed for short-period accommodations for vacationers and travelers. Our cargo trailers are standard vehicle hauling “box” trailers having straight aluminum sided walls and wood floors and are 26 feet long and 8 feet wide. Our trailers are designed to be towed behind small economy sized vehicles and pickup trucks. A Teardrop Trailer, also known as a “Teardrop Camper Trailer”, is a streamlined, compact, lightweight travel trailer, which gets its name from its teardrop profile. We intend to order a current Teardrop Trailer for use in our inventory. . Should we determine to order additional Teardrop Trailers, we intend to order them from independent “Kit” suppliers. Kits are available from several suppliers and are made up of all of the pre-cut, ready to assemble, components of a Teardrop Trailer, except for the chassis. Cargo trailers are available from many independent manufacturers. Our initial order of a Teardrop Trailer was delivered to us on February 15, 2015. The Teardrop Trailer we received was assembled on a trailer chassis that we had obtained from an independent trailer chassis manufacturer. Our Teardrop Trailer has an outer skin of uncoated aluminum and is 6 feet in width, 10 feet in length and 5 feet in height. Wheels and tires are outside the body and are covered by fenders. Our Teardrop Trailer weighs less than 1000 pounds, so most vehicles, can tow one and have little effect on the vehicle's fuel consumption. We have previously paid $5,000 for the manufacture and assembly of our Teardrop Trailer.
We intend to place orders for additional updated Teardrop Trailers or Kits and cargo trailers as we build interest in our advertising offerings. We estimate that it will take approximately 30 days from the date we place an order to the delivery of the trailer to us. When we determine to order additional Teardrop Trailers, we will do so by engaging independent Computer Numerical Control (“CNC”) contractors. Teardrop Trailer we ordered will be assembled on trailer chassis that we have obtained from an independent trailer chassis manufacturer.
As an alternative and with the increased popularity of the teardrop style trailers, we intend to acquire additional constructed or used trailers to include in our inventory.
The unique shape and look of Teardrop Trailers, as well as the small size of Car Hauling Trailers is a key factor in our decision to base the trailer advertising business on these trailers. As an advertising platform, as we believe the "asthetic appeal" will be attract an customer base and retain the adverting images which will appear on our trailers.
In June of 2016, we acquired an enclosed twenty-six (26) foot trailer for use in our business. In December of 2016, we sold the twenty-six (26) foot trailer to an unrelated buyer. In March of 2017, the company has issued a purchase order to acquire a higher quality and larger Cargo trailer. This order was subsequently cancelled when delivery of the trailer was delayed.
We offer advertising space on our trailers. Advertising will be applied by applying decals, large adhesive backed vinyl sheets as decals or by fastening one large sheet of adhesive backed vinyl (to the sides and, in some cases, the top of the trailer. In addition, we will offer to provide our tow vehicle and a driver.
The lettering graphics are widely available from several sources including independent design shops and decal manufacturers.
The vinyl film is manufactured by several suppliers, including 3M, Avery Dennison, and Oracle. It will be designed by independent designers hired by us and will be installed on our trailers by independent printers and dealers of adhesive backed vinyl film. It is the costliest advertising option we will offer.
Our rates will be negotiated at time of contract. We intend to charge an advertising client for a "turnkey" design and application of decals to our trailers at prices starting at $995 with additional charges for more complex designs and for full wrapping services. We also intend to charge our clients a rental price of $295 per day, with an additional $175 per six-hour day if the client wishes us to supply a tow vehicle and driver. Our rates will be based upon the range of services, length of the advertising contract, vehicles needed, miles traveled, length of campaign, ancillary costs and other variables. There is a minimum rental of 3 days required. The client will be required to pay for liability and property damage insurance.
After the rental, we remove the trailer's advertising decals and prepare the trailer for its next client's advertising application and rental.
We believe that the mobile outdoor advertising that we will offer to advertisers is suitable for:
· Event Marketing
· New Product Launches
· Retail Store Openings
· Grand Openings
· Tradeshow Advertising
· Political Advertising and Campaigning
· Publicity
· Concerts
· Sporting Events
· Conventions
· Trade Shows
· Outdoor Festivals
· Beach Cities and Events
· Grand Openings
· Holiday Events
· Motion Picture Premiers
We believe that mobile outdoor advertising offers certain advantages to advertisers, among which include:
· Mobile trailers are flexible providing one with a wide variety of space and cost options, which can be used for anything from short sales promotions to being part of a long-term brand awareness campaign.
· Instead of hoping people see an advertisement, the advertisements are brought to them.
· They are more cost effective than other forms of advertising.
· We can park the trailer in front of a business or a competitors.
· We can thoroughly saturate a specific area unlike regular billboards, radio, TV or direct mail.
· We can provide specific demographic routes so that there are multiple exposures.
· Mobile billboards create impact because of their movement, size and prominence on the road and can go where other advertising can’t. They merely have to be visible to attract attention.
· We can provide advertisements in the middle of all the activity at a special event like a tournament, fair, tradeshow, sporting event et. al.
· As they are eye-level with consumers, the message is communicated directly, increasing the impact of the product.
We will also offer to work closely with our clients to fully understand the client's marketing objectives. We will use our best efforts to identify the highest profile locations in our client's target market in order to provide the most efficient, high exposure, high impact and cost-effective mobile advertising campaign.
At every stage of the process, our services will include design, branding and selection of graphics, to achieve maximum impact. Audio, illumination, promotional sampling and other sensory elements can be added to further enhance an advertising message.
Marketing
We intend to market our advertising, design and consulting services through our website www.tdropmobile.com. Once appropriate funding becomes available, we intend to upgrade our website, introduce ecommerce technologies and advertise on high traffic web properties. We also market our consulting services through personal contacts of our officers and majority shareholder.
There are currently many manufacturers of Teardrop Trailers and Cargo Trailers that offer their products to the marketplace.
Regulation of Mobile Billboards
Several States, including California, have laws that enable cities and local municipalities to prohibit or limit the use of mobile billboards within their geographical borders. Cities in California, including Los Angeles and several surrounding cities have enacted Ordinances which substantially limit the use of mobile billboards. In addition, several other large municipalities in other States have enacted similar legislation. There have been several legal challenges to the legislation based upon freedom of commercial speech. However, the Laws have been upheld to date by the United States 9th Circuit Court of Appeals, based upon a governing body's right to restrict a mode of advertising that may obstruct traffic and parking, may endanger pedestrians, and may constitute blight.
The Los Angeles Ordinance does provide for certain exemptions to the Ordinance, such as allowing businesses to permanently affix advertising signs to a vehicle by among other exemptions, painting on the vehicle or applying advertising decals.
While the California Law and the resulting local Ordinances will effectively limit the geographical area in which our potential clients may use our services, we believe that there are sufficient areas of our intended geographical market area that do not have Ordinances prohibiting mobile billboard advertising. Further, certain of our potential clients may use of our trailers without violating such Ordinances, such as using them at marketing events, i.e. at motorsports racing venues, sporting events, and Grand Opening events.
However, there can be no assurance that we will be successful in obtaining clients in our intended initial geographical marketing area, Southern California, or that there will not be further legal limitations established on the use of mobile billboard advertising.
The Trailer Leasing business
On October 1, 2017, the Company acquired from Gemini Southern, LLC a 2006 Ultra-Comp 53” NASCAR type vehicle transport hauler (the “Hauler”) to be used for promotional / advertising services. The purchase price of the Hauler was $165,000. The Company paid for the Hauler with a promissory note (the “Hauler Note”). The Hauler Note bears interest at 12% per annum and is payable as follows: (i) interest only from October 1, 2017 through February 28, 2018; (ii) $ $3,670 per month from March 1, 2018 through February 28, 2022; and $45,000 on February 1, 2022. The trailer is collateral for the promissory note.
In 2018, we leased the trailer for a term of four years to Rick Ware Racing, LLC, subsequent to the execution of the lease, we engaged Cody Ware as our Chief Executive Officer. Cody Ware is also employee of Rick Ware Racing, LLC. The terms of the lease are the fair market value of leases for such equipment. We have not as yet determined that we will enter into the equipment leasing business as a continuing part of our business.
On November 18, 2019, the Company acquired from Rick Ware Racing a 2007 Featherlite spread axle trailer and a 2008 Freightliner truck both used primarily in NASCAR related operations. The truck and the hauler can be used for promotional / advertising services. The purchase price of the Truck & Hauler was $190,000. The Company paid for the Truck & Hauler with a promissory note from a related party (the “Hauler Note”). The Truck & Hauler Note bears interest at 12% per annum and with a term of 48 months and is payable on the 28th of each month for $5,003.
In February 1, 2020 we acquired and leased back a truck & trailer for a term of four (4) years back to Rick Ware Racing, LLC for $5,003 per month. The lessee is a related party to our CEO and the lease was executed at fair market terms.
Effect of COVID-19 Pandemic on business operations
The COVID-19 Pandemic may be currently impacting our business plans, as the desirability of marketing to the general public using mobile advertising has been lessened by the reduction in automobile and truck traffic, as well as the reduction in pedestrian traffic. Our trailer leasing business has not been affected by the COVID-19 Pandemic as all such activities have been conducted by us using remote work strategies. The Company cannot accurately predict the longer term impact of the COVID-19 Pandemic on its business.
Financing the Business
In February of 2014, the Company established a $450,000 unsecured line of credit with DEVCAP Partners, LLC. The terms of the Line of Credit provide for interest at 10% per annum on all outstanding balances; quarterly interest payments on outstanding balances are due at the end of each quarter respectively. The availability of funds for draw down from this line of credit -related party is subject to the approval of Mr. O’Connell. As of December 31, 2020, the balance owed on the Line of Credit was $226,385.
On February 24, 2014, the Company entered into a line of credit with General Pacific Partners, LLC, a California limited liability company, for an amount up to $450,000. The line of credit is a demand loan bearing interest of 10% per annum. General Pacific Partners, LLC is owned by Kevin O’Connell, the owner and managing member of DEVCAP Partners, LLC, a majority shareholder of the Company. As of January 1, 2020, the line of credit was assumed by FinTekk AP, LLC, a sole member Texas limited liability company owned by Kevin O’Connell. The balance of the line of credit was $0 as of December 31, 2020 and 2019. The Company had unpaid accrued interest of $4,732 at December 31, 2020 and 2019, respectively.
Line of Credit with Gemini Southern, LLC
On December 12, 2014, the Company entered into a line of credit agreement with Gemini Southern, LLC. The Line of Credit Agreement provided that no interest would be owed on the balance of $375,000 through December 31, 2014 and that interest will accrue at 10% per annum commencing January 1, 2015 until the maturity date of December 31, 2020. The line of credit was extended until December 31, 2023 and the credit line was increased to $950,000. The loan balance as of December 31, 2020 and 2019 was $640,626 and $490,000, respectively. On April 1st, 2018 Gemini Southern converted $525,000, the total amount owed to Gemini Southern as of that date, into 4,375,000 shares of our common stock at .12 per share.
Intellectual Property
Our Teardrop Trailer was manufactured from plans provided by an independent Partnership. We have no further relationship with the Partnership. We do not believe that there was anything proprietary in the plans. Should we seek to manufacture and assemble Teardrop trailers from other independent parties, we believe that there are many independent CNC machine shops that have the ability to manufacture and assemble Teardrop Trailers. We do not believe we have any intellectual property.
Competition
We are a small independent start-up mobile billboard advertising company that commenced mobile billboard operations in February of 2014. We face competition from other mobile billboard advertising companies specifically, and generally from all other advertising and media companies. Most, if not all, of our competitors are much larger, well established and better financed companies. In addition, there is no barrier to entry for other advertising companies should they decide to offer advertising on their own trailers or vehicles. We do not consider us to be a factor in our industry and there is no assurance that we will be successful in selling advertising services, or even if successful in obtaining paying advertisers, that we will be profitable. In addition, we also face competition in our trailer leasing business from both small and large leasing companies.
Employees
As of December 31, 2020, we have no full-time employees. Our only employees consist of executive management personnel, all of whom devote 20% or less of their time to our business affairs. We intend to hire full time employees when and if we have the financial resources to do so. Until such time as we are in a position to hire full time employees, we will hire independent contractors to perform work for us on an as needed basis. None of our employees are represented by a labor union or a collective bargaining agreement. We consider our relations with our Management employees to be good.
Real Property
We do not own any real property. We do not own any intellectual property. We occupy office facilities at 620 Newport Center Dr. Ste. 1100 Newport Beach, Ca. 92660 for which we pay no rent per month to DEVCAP Capital Partners, LLC, our majority shareholder. It is a month-to-month oral agreement.
ITEM 1A
ITEM 1A - RISK FACTORS
RISK FACTORS
Risks related to the Corona Virus and COVID-19 Pandemic
Public health officials have recommended and mandated precautions to mitigate the spread of COVID-19, including prohibitions on congregating in heavily populated areas and shelter-in-place orders or similar measures. Our research and development and our entire business may be adversely impacted by actions taken to contain or treat the impact of COVID-19, and the extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted.
An investment in these securities involves a high degree of risk and is speculative in nature. In addition to the other information regarding the Company contained in this Prospectus, you should consider many important factors in determining whether to purchase Shares. Following are what we believe are material risks related to the Company and an investment in the Company. Investors are urged to perform their own due diligence, with the help of their investment, accounting, legal and/or other professionals and to make an independent decision regarding an investment in the Shares.
Risks Associated with our Business
Our independent auditors have issued an audit opinion for us which includes a statement describing our going concern status. Our financial status creates a doubt whether we will continue as a going concern.
As described in Note 3 of our accompanying financial statements, our auditors have issued a going concern opinion regarding the Company. This means there is substantial doubt we can continue as an ongoing business for the next twelve months. The financial statements do not include any adjustments that might result from the uncertainty regarding our ability to continue in business. As such, we may have to cease operations and investors could lose part or all of their investment in the Company.
We lack an operating history and have losses which we expect to continue into the future. There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations.
We were incorporated in June of 2013 and commenced operations in February of 2014. We have not fully developed our proposed business operations and have realized only $170,950 in revenue since our inception. We have little operating history upon which an evaluation of our future success or failure can be made. Our net loss since inception through December 31, 2020 was $2,496,953. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:
· Our ability to develop a business plan that is attractive to advertising clients.
· Our ability to successfully implement our business plan
· The acceptance in the marketplace of our trailers as a viable advertising medium
Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses and not generating sufficient revenues to cover expenses. We cannot guarantee that we will be successful in continuing to generate revenues in the future. In the event the Company is unable to generate sufficient revenues to cover expenses, it may be required to seek additional funding. Such funding may not be available or may not be available on terms which are beneficial and/or acceptable to the Company. In the event the Company cannot generate revenues and/or secure additional financing; the Company may be forced to cease operations and investors will likely lose some or all of their investment in the Company.
Most of our competitors have significantly greater financial and marketing resources than do we.
There exist in our industry many competitors that have significantly greater financial and marketing resources than do we. There are no assurances that our efforts to compete in the marketplace will be successful. There can be no assurance that we will be able to become profitable.
There are legal restrictions on the use of mobile billboards in our intended marketing geographic area.
Several States, including California, have laws that enable cities and local municipalities to prohibit or limit the use of mobile billboards within their geographical borders. Cities in California, including Los Angeles and several surrounding cities have enacted Ordinances which substantially limit the use of mobile billboards. In addition, several other large municipalities in other States have enacted similar legislation. There have been several legal challenges to the legislation based upon freedom of commercial speech. However, the Laws have been upheld to date by the United States 9th Circuit Court of Appeals, based upon a governing body's right to restrict a mode of advertising that may obstruct traffic and parking, may endanger pedestrians, and may constitute blight. These Laws and Ordinances will have the effect of limiting our ability to successfully market our services to potential clients and our business will therefore be adversely affected.
There can be no assurance that we will be successful in obtaining clients in our intended initial geographical marketing area, Southern California, or that there will not be further legal limitations established on the use of mobile billboard advertising.
Our existing principal stockholders exercise control of our Company.
DEVCAP is the beneficial owner of approximately 70% of our issued and outstanding common stock. Kevin P. O’Connell is the majority owner and Managing Member of DEVCAP Partners, LLC.
DEVCAP has established a line of credit of $450,000 (the “Line of Credit”). The receipt of funds from this Line of Credit is subject to the approval of DEVCAP. As of December 31, 2020, we had a balance of $226,385 on the Line of Credit. The terms of the Line of Credit contain annualized interest of 10%, quarterly interest payments paid by the Company on outstanding balances and allows a maximum quarterly draw down on the line of $75,000 per quarter.
Kevin P. O'Connell, the Managing Member of DEVCAP, may have a conflict of interest should we determine to draw upon the Line of Credit. Kevin P. O'Connell will have to determine, whether it is in the best interest of DEVCAP to approve or decline the "loan” or as our control shareholder, if it is in our best interest to approve the loan.
We do not have any additional source of funding for our business plans and may be unable to find any such funding if and when needed, resulting in the failure of our business.
Other than the Lines of Credit, no other source of capital has been identified or sought. If we are not able to draw funds from our Lines of Credit, or we do not find an alternative source of capital, the terms and conditions of acquiring such capital may result in dilution and the resultant lessening of value of the shares of stockholders.
If we are not successful in raising sufficient capital, we will be faced with several options:
1. abandon our business plans, cease operations and go out of business;
2. continue to seek alternative and acceptable sources of capital; or
3. bring in additional capital that may result in a change of control.
In the event any of the above circumstances occur, investors in our shares could lose a substantial part or all of their investment.
We possess minimal capital, which may severely restrict our ability to develop our services. If we are unable to raise additional capital, our business will fail.
We possess minimal capital and must limit the amount of marketing we can perform with respect to our services. We feel we require a minimum of $350,000 to provide sufficient capital to commence with operations and development of the business plan. Our business plan contemplates the development of a website and associated software to allow clients to track objects of interest in real time. Our limited marketing activities may not attract enough clients to generate sufficient revenue to operate profitably, expand our services, implement our business plan or continue operating our business. Our limited marketing capabilities may have a negative effect on our business and may cause us to limit or cease our business operations which could result in investors losing some or all of their investment in the Company.
Because our CEO Cody Ware has other outside business activities and will have limited time to spend on our business, our operations may be sporadic, which may result in periodic interruptions or suspensions of operations.
Because our officers and director have other outside business activities and will only be devoting approximately 10-20% of their time to our operations, our operations may be sporadic and occur at times which are inconvenient to Mr. Ware. Mr. Ware will devote 10% to 20% of his time per week to the business of the Company. In the event they are unable to fulfill any aspect of their duties to the Company, we may experience a shortfall or complete lack of sales resulting in little or no profits and eventual closure of the business.
We are dependent upon our current officers.
We currently are managed by two officers and we are entirely dependent upon them in order to conduct our operations. If they should resign or die, there will be no one to operate the Company. If our current officers are no longer able to serve as such and we are unable to find other persons to replace them, it will have a negative effect on our ability to continue active business operations and could result in investors losing some or all of their investment in the Company.
We depend upon independent contractors to manufacture our Teardrop Trailers.
We do not own or operate a manufacturing or assembly facility to build Teardrop Trailers. We are dependent upon independent Computer Numerical Control (“CNC”) contractors to manufacture and assemble Teardrop Trailers. While we believe that there are numerous CNC contractors that are capable of manufacturing our Teardrop Trailers to our specifications, there can be no assurance that we will be able to obtain Teardrop Trailers at the time and the price we may require. To the extent that we are unable to have Teardrop Trailers delivered to us at the time and price that we specify, our business will be adversely affected.
Having one director limits our ability to establish effective independent corporate governance procedures and increases the control of our president over operations and business decisions.
We have only one director currently, who is our Chief Executive Officer. Accordingly, we cannot establish board committees comprised of independent members to oversee functions like compensation or audit issues. In addition, a tie vote of board members is decided in favor of the chairman, which gives him significant control over all corporate issues, including all major decisions on operations and corporate matters such as approving business combinations.
Until we have a larger board of directors that would include some independent members, if ever, there will be limited oversight of our president’s decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions, even if they are not in the best interests of minority shareholders.
The limited public company experience of our management team could adversely impact our ability to comply with the reporting requirements of U.S. Securities Laws.
Our management has limited public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002. Our management has never been responsible for managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our management may not be able to implement programs and policies in an effective and timely manner that adequately responds to such increased legal, regulatory compliance and reporting requirements including establishing and maintaining internal controls over financials reporting. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our ability to comply with the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) which is necessary to maintain our public company status. If we were to fail to fulfill those obligations, our ability to continue as a U.S. public company would be in jeopardy in which event you could lose your entire investment.
Risks Associated with Ownership of our Shares
There is no active trading market for our common stock and if a market for our common stock does not develop, our investors will be unable to sell their shares.
From October 2015 through December of 2017 our common shares were listed on the Over the Counter Bulletin Board in the United States under the symbol “TRDP”, In December of 2017, we were notified by FINRA that due to lack of trading, our common shares would no longer be listed for trading on the OTCQB. Accordingly, there are currently no recent bid or ask quotes for our common shares available because no market makers share data or quote our common shares and there is no quoting system available to record and settle trades. Our common shares may now be traded on the “Grey Market” or on the “Grey Sheets”, where trading is moderated by a broker and done between consenting individuals at a price they agree on. The only documentation that can be publicly found regarding the trades is when the last trade took place. The failure to develop or maintain a liquid trading market negatively affects our common share's value and makes it difficult or impossible for you to sell your shares. Even if a liquid market for common shares does develop, the market price may be highly volatile. In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our common shares.
If a public market for our common stock does not develop, then investors may not be able to resell the shares of our common stock that they have purchased and may lose all of their investment. If we establish a trading market for our common stock, the market price of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operation results, general market conditions and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the shares of developmental stage companies, which may materially adversely affect the market price of our common stock.
Our shares are defined as “penny stock”, and the rules imposed on the trading of our shares may affect a shareholder’s ability to resell any of their shares, if at all.
Our shares are defined as a “penny stock” under the Securities and Exchange Act of 1934, and rules of the Commission. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser’s written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect your ability to resell any shares you may purchase in this offering in the public markets.
We Are Unlikely to Pay Dividends
To date, we have not paid, nor do we intend to pay in the foreseeable future, dividends on our common stock, even if we become profitable. Earnings, if any, are expected to be used to advance our activities and for general corporate purposes, rather than to make distributions to stockholders. Prospective investors will likely need to rely on an increase in the price of Company stock to profit from his or her investment. There are no guarantees that any market for our common stock will ever develop or that the price of our stock will ever increase. If prospective investors purchase Shares pursuant to this Offering, they must be prepared to be unable to liquidate their investment and/or lose their entire investment.
Since we are not in a financial position to pay dividends on our common stock, and future dividends are not presently being contemplated, investors are advised that return on investment in our common stock is restricted to an appreciation in the share price. The potential or likelihood of an increase in share price is questionable at best.
State Securities Laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus.
There is no public market for our securities, and there can be no assurance that any public market will develop in the foreseeable future. Secondary trading in securities sold in this offering will not be possible in any state in the U.S. unless and until the common shares are qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in such state. There can be no assurance that we will be successful in registering or qualifying our securities for secondary trading or identifying an available exemption for secondary trading in our securities in every state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of the securities in any particular state, the securities could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our securities, the market for our securities could be adversely affected.
ITEM 1B
ITEM 1B - UNRESOLVED STAFF COMMENTS
None.
ITEM 2
ITEM 2 - DESCRIPTION OF PROPERTIES
We occupy office facilities at 620 Newport Center Dr. Ste. 1100 Newport Beach, Ca. 92660 for which we pay no rent per month to DEVCAP Partners, LLC, our majority shareholder. It is a month-to-month oral agreement.
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS
We are not a party to any material legal proceedings. We are not aware of any pending or threatened litigation against us that we expect will have a material adverse effect on our business, financial condition, liquidity, or operating results. However, legal claims are inherently uncertain, and we cannot assure you that we will not be adversely affected in the future by legal proceedings
ITEM 4
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5
ITEM 5 - MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
From October 2015 through December of 2017 our common shares were listed on the Over the Counter Bulletin Board in the United States under the symbol "TRDP". In December of 2017, we were notified by FINRA that due to lack of trading, our common shares would no longer be listed for trading on the OTCQB. Accordingly, there are currently no recent bid or ask quotes for our common shares available because no market makers share data or quote our common shares and there is no quoting system available to record and settle trades. Our common shares may now be traded on the “Grey Market” or on the “Grey Sheets”, where trading is moderated by a broker and done between consenting individuals at a price they agree on. The only documentation that can be publicly found regarding the trades is when the last trade took place. The failure to develop or maintain a liquid trading market negatively affects our common share's value and makes it difficult or impossible for you to sell your shares. Even if a liquid market for common shares does develop, the market price may be highly volatile. In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our common shares.
No trades of our common stock occurred through the facilities of the OTCQB. The following table sets forth the range of the high and low bid prices per share of our common stock for each quarter (or portion thereof) as reported on the OTCBB or OTCQB, as applicable, beginning on February 8, 2013. These quotations represent interdealer prices, without retail markup, markdown or commission, and may not represent actual transactions. There currently is no liquid trading market for our common stock.
There can be no assurance that a significant active trading market in our common stock will develop, or if such a market develops, that it will be sustained.
* Represents quoted prices but not actual trades.
** In December of 2017, our shares were de-listed from the OTCQB and are now on the “Grey Market”.
As soon as practicable, and assuming we satisfy all necessary initial listing requirements, we intend to apply to have our common stock re-listed for trading on the OTCQB although we cannot be certain that our application will be approved.
Recent Sales of Unregistered Securities.
None
Re-Purchase of Equity Securities.
No equity securities were repurchased during the twelve months ended December 31, 2020 or 2019.
Dividends.
No dividends have been declared or paid during the twelve months ended December 31, 2020 or 2019.
Equity Compensation Plan Information.
We do not have an Equity Compensation Plan.
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA
As a “smaller reporting company’ as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
ITEM 7
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
The following discussion and analysis of our results of operations and financial condition for the fiscal years ended December 31, 2019 and 2020 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this annual report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Risk Factors”, “Cautionary Notice Regarding Forward-Looking Statements” and “Description of Business” sections and elsewhere in this annual report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” “predict,” and similar expressions to identify forward-looking statements. Although we believe the expectations expressed in these forward-looking statements are based on reasonable assumptions within the bound of our knowledge of our business, our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of this report. We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future.
In addition to historical information, this Annual Report contains 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. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, risks and uncertainties, including the risk factors set forth in Item 1A. above and the risk factors set forth in this Annual Report. Generally, the words “anticipate”, “expect”, “intend”, “believe” and similar expressions identify forward-looking statements. The forward-looking statements made in this Annual Report are made as of the filing date of this Annual Report with the SEC, and future events or circumstances could cause results that differ significantly from the forward-looking statements included here. Accordingly, we caution readers not to place undue reliance on these statements. We expressly disclaim any obligation to update or alter our forward-looking statements, whether, as a result of new information, future events or otherwise after the date of this document.
Plan of Operation
Overview
On June 3, 2013, Teardroppers, Inc. (the “Company”, “we”, “us”, or “our”), was incorporated under the laws of the state of Nevada.
We are currently engaged in the business of mobile billboard advertising by offering to provide billboard advertising space on custom designed “Teardrop Trailers” and on car hauling trailers. Teardrop Trailers are usually designed for short-period accommodations for vacationers and travelers. Car hauling trailers are “box” like and have more space for advertising displays. Our trailers are light weight so that they can be towed behind small economy sized vehicles and pickup trucks. Beginning in 2015, we introduced classic car tow options with enclosed car hauler trailers as rental options.
In 2017, we acquired a 2006 Ultra Comp car hauler trailer from Gemini Southern, LLC, a related party, and subsequently leased the trailer over a term of four years to Rick Ware Racing, a company associated with our Chief Executive Officer. The terms of the lease are the fair market value of leases for such equipment.
Trends & Outlook
Revenue - Our revenue is derived primarily from renting our trailers with specific advertising and branding messaging lettered to each trailer that can be used in display settings as well as leasing our hauler trailer acquired in April of 2017. Additionally, we may receive additional revenue from customers requiring custom advertising applications to the trailers they rent from our Company.
Long-term, we cannot predict the growth or decline of our revenues. If certain changes in the local or national economies of our customers declines our potential revenue would likely decrease. Such a decline in advertising spends available to potential customers in our market would have a negative effect on our business.
Operating Expenses
Our Operating expenses are currently attributed to the regular operations of the Company. These costs can vary depending on commodities such as fuel, the distance traveled, costs of advertising or changes in technical and engineering consulting fees.
Significant Accounting Policies
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 of the Notes to Financial Statements describes the significant accounting policies used in the preparation of the financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.
A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known.
Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements:
Use of Estimates
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Cash and Equivalents - We maintain our cash in bank deposit accounts, which at times, may exceed federally insured limits. We have not experienced any losses in such account.
Intangible and Long-Lived Assets - We follow ASC 360, "Accounting for Impairment or Disposal of Long-Lived Assets," which established a "primary asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. No impairment losses were recognized during the years ended December 31, 2020 and 2019.
Stock Based Compensation - We recognize expenses for stock-based compensation arrangements in accordance with provisions of Accounting Standards Codification 714. Accordingly, compensation cost is recognized for the excess of the estimated fair value of the stock at the grant date over the exercise price, if any. For equity instruments issued to non-employees, the estimated fair value of the equity instrument is recorded on the earlier of the performance commitment date or the date the services required are completed.
Basis of presentation
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Without further funding, we anticipate running out of cash after December 31, 2020, and accordingly our current cash balances will not be sufficient to fund our operating expenses after December 31, 2020. We have received only $170,950 in revenues since our inception through December 31, 2020 and have incurred an accumulated net loss of $2,496,953 and accumulated net cash used in operations of $1,186,701.
Unless we begin generating more revenues in the near future, we anticipate that we will continue to incur net losses in the near term, and we may never be able to achieve profitability. We expect to continue to incur losses for the foreseeable future. In order to achieve profitable operations, we need to generate significant revenues from leasing fees. We cannot be certain that our business strategies will be successful or that will we generate significant revenues and become profitable. Additionally, we will need to obtain additional public or private equity financings or debt financings in order to continue operations.
Revenue recognition
The Company follows the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin 104 for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, and collectability is reasonably assured. Subscription revenues shall be recognized over the period benefited. Deferred revenues shall be recorded when cash has been collected, however the related service has not yet been provided.
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.
Income taxes
The Company uses the liability method of accounting for Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance can be provided for a net deferred tax asset, due to uncertainty of realization.
Net loss per common share
Net loss per common share is computed pursuant to ASC No. 260 "Earnings per Share." Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive debt or equity instruments issued or outstanding during the twelve months ended December 31, 2020 and 2019.
Recently Issued Accounting Pronouncements
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe that the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.
Year Ended December 31, 2020 as compared to the Year Ended December 31, 2019
Revenues
Revenues for the year ended December 31, 2020 were $71,850 compared to $53,100 for the year ended December 31, 2019. The Company incurred no cost of revenue for 2020 and 2019. Revenue for 2020 was not advertising related and primarily derived to leasing and consulting income received by the Company.
Interest income - related parties for the year ended December 31, 2020 was $24,771 compared to $0 in the year ended December 31, 2019. The Company entered into two direct financing leases with related parties in 2020.
Operating Expenses
Operating expenses for the year ended December 31, 2020 were $459,104 as compared to $405,234 for the year ended December 31, 2019. Expenses in 2020 compared to 2019 included $57,410 compared to $63,072 in consulting from unrelated party, $132,330 compared to $123,000 in consulting from related party, $196,471 compared to $176,412 in general and administrative, and $72,893 compared to $42,750 in professional fees. The increase in expenses in 2020 is attributable to an increase in general and administrative expenses and professional fees.
Interest Expense
Interest expense - related parties for the twelve months ended December 31, 2020 was $88,133 and $49,831 in the twelve months ended December 31, 2019. The increase in interest expense in 2020 is directly related to an increase in the indebtedness of the Company.
Interest expense - unrelated parties was $2,282 for the twelve months ended December 31, 2020 and $0 for the twelve months ended December 31, 2019. The increase in 2020 is directly related to debt incurred in 2020 to finance an asset used in a direct financing lease.
Net Loss
The net loss for the twelve months ended December 31, 2020 was $452,898 as compared to a loss of $401,965 for the twelve months ended December 31, 2019 due to the factors discussed above. The net loss increased in 2020 due to a increase in administrative fees accrued to unrelated parties.
Liquidity & Capital Resources
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As at December 31, 2020 the Company had total assets of $373,819, comprising primarily of $49,473 in cash, $102,936 in property and equipment and current liabilities of $1,866,036 and a working capital deficit of $1,764,110. The Company has incurred losses since Inception to December 31, 2020 of $2,496,953 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern for a period of one year from December 31, 2020. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions. By doing so, the Company hopes to generate profits. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern.
Cash Flows for the Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019
Operating Activities
During the year ended December 31, 2020, we used $205,760 in cash in operating activities, compared to $199,992 during the year ended December 31, 2019. The increase in cash used during 2020 was primarily due to an increase in the amount of cash used to pay for expenses incurred by the company.
Investing Activities
During the year ended December 31, 2020 we used $69,000 from investing activities related to the acquisition of equipment, compared to $190,000 during the year ended December 31, 2019. The reduction for 2020 was due to a reduced need for capital to acquire assets for leasing.
Financing Activities
During the year ended December 31, 2020, net cash provided by financing activities were $274,198 compared to $368,169 during the year ended December 31, 2019.
Stockholder Matters
Total stockholders’ deficit was $1,622,475 on December 31, 2020 and was $1,169,577 on December 31, 2019.
Management expects to raise $400,000 in capital through the issuance of debt and equity in 2021 and believes it will be able to raise sufficient capital over the next twelve months to finance operations. However, there can be no assurances that the Company will be successful in this regard or will be able to eliminate its operating losses. The accompanying financial statements do not contain any adjustments which may be required as a result of this uncertainty.
Management estimates that the cost of operating our business for the next 12 months will require additional capital of $400,000 or approximately $33,333 per month, consisting of: $10,000 for officers’ salaries, $5,000 for executive marketing assistants, $1,500 for additional office space, $1,500 for telecom and communications, $12,667 for marketing efforts, $3,000 for legal and accounting costs.
The Company intends to hold discussions with existing shareholders, new prospective shareholders and various lenders in pursuing the capital we need for the upcoming twelve months of operations. Additionally, the Company may elect to draw down additional proceeds from its line of credit with DEVCAP. There can be no assurance that we will be able to raise any additional equity or debt capital.
Mr. O'Connell is also the managing member and majority membership interest holder of General Pacific Partners, LLC a limited liability company (“GPP”). In February of 2014, the Company established a $450,000 unsecured line of credit with GPP (the “Line of Credit”). The terms of the Line of Credit provide for interest at 10% per annum on all outstanding balances. The availability of funds for draw down from this line of credit is subject to the approval of Mr. O’Connell. Beginning January 1, 2020, FinTekk AP, LLC a Texas single member limited liability company owned by Kevin O’Connell assumed the line of credit. As of December 31, 2020, we have $0 balance on the GPP line of credit.
Mr. O'Connell is the managing member and the majority membership interest holder of DEVCAP Partners, LLC, a limited liability company (“DEVCAP”). In February of 2014, the Company established a $450,000 unsecured line of credit with DEVCAP (the “Line of Credit. The Company’s liability to DEVCAP has been assigned to FinTekk. Mr. O’Connell owns a majority interest in FinTekk AP, LLC. FinTekk AP, LLC and FinTekk owns approximately seventy-eight (70%) of the outstanding shares of common stock of the Company. The terms of the Line of Credit provide for interest at 10% per annum on all outstanding balances. The availability of funds for draw down from this line of credit is subject to the approval of Mr. O’Connell. As of December 31, 2020, we owe $226,385 on the FinTekk line of credit.
The Company’s capital requirements consist of general working capital needs, scheduled principal and interest payments on debt when required, obligations, and capital expenditures. The Company’s capital resources consist primarily of cash generated from proceeds through the drawing down of capital from our lines of credit. At December 31, 2020, the Company had cash on hand of $49,473.
Experienced and Dedicated Personnel
We intend to maintain a highly competitive team of experienced and technically proficient employees and motivate them through a positive work environment and stock ownership. We believe that employee ownership, which may be encouraged through a stock option plan, is essential for attracting, retaining and motivating qualified personnel. While we have not yet adopted a stock option plan, we intend to do so in the near future.
Financing Needs
Including the net proceeds from a private placement stock offering, the Company may only have sufficient funds to conduct its operations through December 31, 2021. We earned revenue of $71,850 in 2020, and $53,100 for the year ended December 31, 2019. It is anticipated that the Company will generate additional revenue in 2021; however, there can be no assurance that if in fact the Company does generate increased revenue in 2021, that such revenues would be sufficient to sustain or grow the operations. It is therefore anticipated that the Company will need additional capital in order to continue operations.
The Company presently does not have any available outside credit, bank financing or other external sources of liquidity, other than the net proceeds we receive from our related party lines of credit. Due to its brief history and historical operating losses, the Company's operations have not been a source of liquidity. The Company will need to obtain additional capital in order to continue operations. In order to obtain capital, the Company may need to sell additional shares of its common stock or borrow funds from private lenders. There can be no assurance that additional financing will be available in amounts or on terms acceptable to the Company, if at all.
The Company cannot guarantee that it will be able to obtain additional capital. The Company will seek capital from the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. The recent downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if the Company is able to raise the funds required, it is possible that it could incur unexpected costs and expenses or experience unexpected cash requirements. Further, if the Company issues additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of the Company's common stock. If additional financing is not available or is not available on acceptable terms, the Company will have to curtail or may even cease its operations.
Recent Financings
As of December 31, 2020, we had a balance owing of $226,385 to one related party; FinTekk AP, LLC and $640,626 to a related party lender, Gemini Southern, LLC, pursuant to unsecured Line of Credit Agreements and a loan payable. The Line of Credit Agreements and loan payable provide for interest at the rate of 10% per annum.
On November 18, 2019, the company acquired from a related party Rick Ware Racing a 2007 Featherlite spread axle trailer and a 2008 Freightliner truck both used primarily in NASCAR related operations. The truck and the hauler can be used for promotional / advertising services. The purchase price of the Truck & Hauler was $190,000. The Company paid for the Truck & Hauler with cash. Subsequently the Company accessed $190,000 from its line of credit with Geminin Southern, LLC, a related party (the “Hauler Note”). .
In February 1, 2020 we leased the truck & trailer for a term of four (4) years back to Rick Ware Racing, LLC for 5,003 per month. The lessee is a related party to our CEO and the lease was executed at fair market terms.
ITEM 8
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by Item 8 are submitted in a separate section of this report, beginning on, and are incorporated herein and made a part hereof.
ITEM 9
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
ITEM 9A
ITEM 9A - 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.
We are a Smaller Reporting Company with limited revenues, with a relatively small number of bookkeeping entries.
Our Chief Executive Officer, who is also our Chief Financial Officer has, as of the end of the period covered by this report, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were not effective at the reasonable assurance level discussed above, due to (i) there is no Audit Committee; and (ii) there is no internal accounting expertise in the Company;
This annual 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 year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B
ITEM 9B - OTHER INFORMATION
None
PART III
ITEM 10
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officer
MANAGEMENT
Larry Krogh - On April 6, 2018, the Company elected Larry Krogh as its sole director, Chief Executive Officer and Chief Financial Officer. Mr. Krogh resigned his positions as CEO and CFO on September 25th, 2018. From 2002 through the present, Mr. Krogh has been the CEO and founding Broker of GP Property Management Inc., a real estate brokerage sales & marketing company that works with hedge funds and assists real estate principals in long term investments and speculation.
In 2000, Mr. Krogh was CEO of Assist You Sell. He ran startups leading to the expansion of various franchises. In 1999, Mr. Krogh was the CFO of Lightpoint. He was responsible for capital formation, managed sales accounts, and assisted in acquiring contracts with outside companies. Mr. Krogh collaborated with Affinity Lifestyles in 1998 where he managed various key accounts, managed employees and led business development efforts to bring new companies and related value to Affinity. In 1997, Mr. Krogh was CFO of ARC Equities and ran various mergers and acquisition activities for the company. Finally, from 1995 through 1996, Mr. Krogh was an agent with New York Life.
Cody Ware - On September 25, 2018 - Cody Ware was appointed as the Chief Executive Officer and Chief Financial Officer of the Company. From 2012 to the date of this 10-K Report, Mr. Ware has been involved in professional motorsports both as a driver and as a businessman. He has worked a with professional racing teams across all of the top levels in NASCAR stock car and IMSA sports car series. Mr. Ware has secured various levels of sponsorship with multiple national companies such as Racetrac gas stations and Bubba Burger. Mr. Ware has been able to tie in professional athletes from all over the country to help bring NASCAR into the mainstream light as well as showcase business to business relationships. Mr. Ware completed courses at La Sierra University in Riverside, California.
ITEM 11
ITEM 11 - EXECUTIVE COMPENSATION
Our Chief Executive Officer, Cody Ware, receives $1,500 per month pursuant to an oral understanding. Our former CEO, and director, in 2018, received 15,000 shares of common stock of the Company valued at $1.00 per share
The Company does not intend to pay employee directors a separate fee for their services.
There are no written employment agreements with management. Management compensation will be determined by the board of directors based upon revenues and profits, if any, of the Company.
The officers and directors have the responsibility to determine the timing of remuneration for key personnel.
The Company does not intend to pay directors a separate fee for their services.
To date, the Company has paid minimal compensation to its officers in the form of stock and cash payments due to the fact that the Company is not yet cash flow positive. However, since September 2014, the Company had paid Ray Gerrity, our former CEO, $2,500 per quarter and from October 2014 through April of 2018.
The following table summarized our executive compensation for the years ended December 31, 2020 and 2019.
(1) Mr. Gerrity was issued 100,000 founders' shares of common stock and purchased 25,000 shares of common stock at $.02 per share. The 100,000 founder shares were valued at par $0.001 which resulted in an expense of $100.
(2) Mr. Wilson was issued 25,000 founder' shares. The 25,000 founder shares were valued at par $0.001 which resulted in an expense of $25.
(3) Mr. Krogh served as our Chief Executive Officer from April 5, 2018 through September 25, 2018. He received 15,000 shares of common stock in August of 2018.
(4) Mr. Ware was appointed Chief Executive Officer on September 25, 2018. He is paid $1,500 per month pursuant to an oral understanding with the Company. Between July 1, 2020 and December 31,2020 Mr. Ware was paid $4,500 per month. Commencing January 1, 2021, he is being paid$1,500 per month.
There are no written employment agreements with management. Management compensation will be determined by the board of directors based upon revenues and profits, if any, of the Company.
Director Independence
Our board of directors is currently composed of one member, who does not qualify as independent directors in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed, and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding the beneficial ownership of the issued and outstanding shares of our common stock as of December 31, 2020 by the following persons:
(1) Kevin O'Connell has full investment authority for shares of FinTekk Partners, LLC. On February 26, 2019, DEVCAP Partners, LLC transferred all of its shares in the Company to FinTekk AP, LLC.
(2) Includes 75,000 shares owned by Shark Diver Consulting, Inc. Mr. Verska has investment authority for the shares owned by Shark Diver Consulting, Inc.
(3) Steve Urvan has full investment authority for shares of GB Investments, Inc. & Gemini Southern
(4) The Estate of Augustus B. O'Connell has full investment authority for shares of Cassin Farlow, LLC. Kevin O’Connell is the Administrator of the Estate
(5) Includes 125,000 shares owned by the Estate of Augustus B. O'Connell. Kevin O’Connell is the Administrator of the Estate
Long Term Incentive Awards
Option Grants in Last Fiscal Year
We have not awarded any options to our executive officers under any incentive plans.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
There have been no option exercises.
Employment Contract and Termination of Employment Agreements
We have no employment agreements with any officers or employees.
Limitations on liability and indemnification of officers and directors
Our certificate of incorporation includes a provision that eliminates the personal liability of our directors for monetary damages for breach of fiduciary duty as a director, to the fullest extent permitted by Nevada Revised Statutes. Our certificate of incorporation also provides that we must indemnify our directors and officers to the fullest extent permitted by Nevada law and advance expenses to our directors and officers in connection with a legal proceeding to the fullest extent permitted by Nevada law, subject to certain exceptions. We are in the process of obtaining directors’ and officers’ insurance for our directors, officers and some employees for specified liabilities.
The limitation of liability and indemnification provisions in our certificate of incorporation may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. They may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though an action of this kind, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. However, we believe that these indemnification provisions are necessary to attract and retain qualified directors and officers.
SEC Policy on Indemnification
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Long Term Incentive Plans
There are no long-term incentive plans.
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Kevin P. O’Connell is the majority membership holder of DEVCAP Partners, LLC. DEVCAP Partners, LLC has established a Line of Credit with the Company of $450,000. . The Company’s liability to DEVCAP has been assigned to FinTekk. Mr. O’Connell owns a majority interest in FinTekk AP, LLC. Fintekk owns approximately seventy (70%) of the outstanding shares of common stock of the Company. The receipt of funds from this line of credit is subject to the approval of DEVCAP Partners, LLC. As of December 31, 2020, we had a balance owing of $226,385 from the Line of Credit. The terms of the Line of Credit contain annualized interest of 10%, with quarterly interest payments paid by the Company on outstanding balances. Mr. O’Connell may have a conflict of interest should we determine to draw upon the line of credit. He will have to determine, whether it is in the best interest of DEVCAP Partners, LLC to approve or decline the "loan" or, as our control shareholder, if it is in our best interest to approve the loan. We had accrued interest owing of $27,374 on December 31, 2020.
In addition, we have a line of credit established with General Pacific Partners, LLC (GPP). Kevin P. O’Connell is the majority membership holder of GPP. This line of credit with the Company is $450,000. The receipt of funds from this line of credit is subject to the approval of GPP. As of December 31, 2020, we had no balance owing ($0) to the Line of Credit. The terms of the Line of Credit contain annualized interest of 10%, with quarterly interest payments paid by the Company on outstanding balances. Mr. O’Connell may have a conflict of interest should we determine to draw upon the line of credit. He will have to determine, whether it is in the best interest of GPP to approve or decline the "loan" or, as our control shareholder, if it is in our best interest to approve the loan. We had accrued interest owing of $4,732 on December 31, 2020.
On January 1, 2014, the Company executed a three-year consulting agreement with DEVCAP Partners, LLC whereby the Company agreed to pay $7,500 a month for consulting services to be provided to the Company such as marketing, business development, accounting, finance, corporate structure and tax planning. On January 1st, 2018 the agreement with DEVCAP Partners, LLC was extended through December 31, 2019.
In November 18, 2019, the Company acquired from a related party Rick Ware Racing, a 2007 Featherlite spread axle trailer and a 2008 Freightliner truck both used primarily in NASCAR related operations. The truck and the hauler can be used for promotional / advertising services. The purchase price of the Truck & Hauler was $190,000. The Company paid for the Truck & Hauler with cash. Subsequently the Company accessed $190,000 from its line of credit with Geminin Southern, LLC, a related party. On February 5, 2020. the truck and trailer were leased back to Rick Ware Racing, LLC for $5,003 per month for 48 months.
On March 1, 2018, we leased the Hauler to Rick Ware Racing, LLC. The term of the Lease is for 4 years, payable at $3,670 per month.
Cody Ware is the son of Rick Ware. We have entered into a trailer lease agreement with Rick Ware through February 1st, 2022. The lease terms are as described herein above.
Conflicts of Interest
Each officer and director is, so long as she or he is an officer or director, subject to the restriction that all opportunities contemplated by our plan of operation that come to his attention, either in the performance of his duties or in any other manner, will be considered opportunities of, and be made available to us and the companies that he is affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer or director. If we or the companies to which the officer or director is affiliated each desire to take advantage of an opportunity, then the applicable officer or director would abstain from negotiating and voting upon the opportunity. However, the officer or director may still take advantage of opportunities if we should decline to do so. Except as set forth above, we have not adopted any other conflict of interest policy in connection with these types of transactions.
ITEM 14
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
We retained Assurance Dimensions, Certified Public Accountants and Associates of Coconut Creek, FL to audit the 2020 and 2019 financial statements. The following are the services provided and the amounts billed.
Audit & Review Fees
The aggregate fees billed, for professional services rendered for the reviews of quarterly reports and the audit of the Company’s annual financial statements during the fiscal years ended December 31, 2020 and 2019, was $28,580 and $19,000, respectively.
Related Fees
For the year ended December 31, 2020 and 2019 there were no fees for services reasonably related to the performance of the audit or review of the financial statements outside of those fees disclosed above under “Audit Fees”.
Tax Fees
For the years ended December 31, 2020 and 2019, the Company incurred no fees for services for tax compliance, tax advice and tax planning work.
All Other Fees
For the year ended December 31, 2020 and 2019, there were no other fees billed for products and services outside of those fees disclosed above under “Audit Fees”, “Audit-Related Fees” and “Tax Fees”.
Audit Committee Pre-Approval Policies and Procedures
The policy of the board of directors is to pre-approve all audit and permissible non-audit services provided by our independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services. The independent auditor and management are required to periodically report to the board of directors regarding the extent of services provided by the independent auditor in accordance with this pre-approval. The chair of the board of directors is also authorized, pursuant to delegated authority, to pre-approve additional services of up to $5,000 per engagement on a case-by-case basis, and such approvals are communicated to the full board of directors at its next meeting.
ITEM 15
ITEM 15 - EXHIBITS
(1) Financial Statements
The following financial statements of the Company are included in Part II, Item 8 of this Report:
(2) Financial Statement Schedules
Schedules are omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is given in the financial statements or the notes thereto.
(3) Exhibits
Exhibit # Description
3(i).1 Articles of Incorporation of The Teardroppers, Inc., as amended *
3(ii).1 Corporate Bylaws for The Teardroppers, Inc. *
10.1(*) Line of Credit Agreement with DEVCAP Partners, LLC
10.2(*) Purchase Order for Teardrop Trailer dated July 23, 2014
10.3(*) Consulting Agreement with DEVCAP Partners, LLC dated January 1, 2014
10.4(*) Consulting Agreement with Gemini Southern LLC, dated September 30, 2013
10.5(*) Consulting agreement with Rayna Austin, dated October 8, 2013
31.1 Section 302 Certification by the Corporation’s Chief Executive Officer
31.2 Section 302 Certification by the Corporation’s Chief Financial Officer
32.1 Section 906 Certification by the Corporation’s Chief Executive Officer
32.2 Section 906 Certification by the Corporation’s Chief Financial Officer
101.INS XBRL Instance Document
101.SCH XBRL Schema Document
101.CAL XBRL Calculation Linkbase Document
101.DEF XBRL Definition Linkbase Document
101.LAB XBRL Label Linkbase Document
101.PRE XBRL Presentation Linkbase Document
_______________
* Previously filed with Form S-1
ITEM 16 - FORM 10-K SUMMARY
None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Cody Ware
Chief Executive Officer, Chief
April 14, 2021
Cody Ware
Financial Officer and Treasurer,
(Principal Executive Officer and Principal Financial Officer)
FINANCIAL STATEMENTS
For The Years Ended
December 31, 2020 and 2019
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of The Teardroppers, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of The Teardroppers, Inc. (the Company) as of December 31, 2020 and 2019, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph - Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had a net loss and net cash used in operating activities of approximately $452,898 and $205,760, respectively for the year ended of December 31, 2020 and a working capital deficit and accumulated deficit of approximately $1,764,110 and $2,496,953 respectively, at December 31, 2020. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Collectability of receivables
Description of the Matter
During 2019 and 2020, the Company purchased and leased the back assets to various related parties. The term of the leases ranged between 48-60 months. At the end of the leases, the related parties have the right to purchase the assets. These leases were accounted for as finance leases in accordance with Accounting Standards Codification 842, Leases. Significant judgement is involved in estimating the collectability of these receivables.
How We Addressed the Matter in Our Audit
The primary procedures we performed to address this critical audit matter included examining each lease agreement, evaluating management’s assessment of the collectability of each lease receivable, and testing the collection of outstanding balances at year-end. Based on our procedures we deemed the Company’s treatment of each lease receivable to be appropriate.
We have served as the Company’s auditor since 2019.
Margate, Florida
April 14, 2021
The Teardroppers, Inc.
BALANCE SHEETS
The accompanying notes are an integral part of the financial statements.
The Teardroppers, Inc.
STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of the financial statements.
The Teardroppers, Inc.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
The accompanying notes are an integral part of the financial statements.
The Teardroppers, Inc.
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of the financial statements.
TEARDROPPERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
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 intend to enter the business of mobile billboard advertising by offering to provide billboard advertising space on custom designed "Teardrop Trailers". Teardrop Trailers, are usually designed for short-period accommodations for vacationers and travelers. Teardrop Trailers are designed to be towed behind small economy sized vehicles and pickup trucks.
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”).
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 methods applied.
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 December 31, 2020 and 2019, the Company had no cash equivalents.
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.
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, accounts payable, accrued expenses, and deferred revenue 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 December 31, 2020 and 2019.
The Company had no assets and/or liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019, respectively, using the market and income approaches.
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 (3) years for equipment, five (5) years for automobile, and seven (7) years for furniture and fixtures. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.
Impairment of Long-Lived Assets
In accordance with ASC Topics 350 “Goodwill and Other Intangibles” and 360, “Property, Plant, and Equipment” the Company reviews the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair value.
Commitments and contingencies
The Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
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 years ended December 31, 2020 and 2019, the Company recognized no income from the rental of the trailers.
Subsequent to the adoption of amended accounting guidance for leasing transactions (the “new lease standard”), new leases are classified as sales-type leases, direct financing leases, or operating leases. Leases that commenced prior to the adoption of the new lease standard were not reassessed or restated pursuant to the practical expedients elected and will continue to be accounted for under previous lease accounting guidance.
When a contract includes lease and non-lease components, the Company allocates consideration under the contract to each component based on relative standalone selling price. Whenever the terms of the lease transfer control to the lessee, the contract is typically classified as a sales-type lease. As of December 31, 2020, the Company did not have any sales-type or direct financing leases under the new lease standard.
All other leases that do not meet the definition of a sales-type lease or direct financing lease are classified as operating leases. The underlying asset in an operating lease arrangement is carried at depreciated cost as “Equipment under operating leases” within Property, plant, and equipment, net on the balance sheets. Depreciation is calculated using the straight-line method over the term of the underlying lease contract and is recognized as Cost of net revenue. The depreciable basis is the original cost of the equipment less the estimated residual value of the equipment at the end of the lease term. The Company recognizes operating lease revenue on a straight-line basis over the lease term and expenses deferred initial direct costs on the same basis. Impairment of equipment under operating leases is assessed on the same basis as other long-lived assets.
The Company provides lessees with the option to extend the lease or purchase the underlying asset at the end of the lease term, which is considered when evaluating lease classification. In general, the Company’s lease arrangements do not have variable payment terms and are non-cancelable.
In March 2018, the Company entered into a four-year agreement to lease equipment to an unrelated shareholder. In September 2018, the son of the shareholder became the Chief Financial Officer. At that point the shareholder is considered a related party. Beginning with the quarter ended September 30, 2018, the operating lease income will be reported as related party income on the Condensed Statement of Operations. For the years ended December 31, 2020 and 2019, related party lease income was $48,000 and $48,000 respectively.
In January 2019, the Company entered into a two-year agreement to lease a vehicle to an unrelated third party. As of December 31, 2020, recognized operating lease income was $5,100.
In January 2015, the Company received $14,500 as a deposit for advertising space to be provided in the future. As of December 31, 2020 and 2019, 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.
Income taxes
The Company follows Section 740-10-30 of the FASB ASC, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB ASC (“Section 740-10-25”) with regards to uncertainty in income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its assets and/or liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25. The Company’s tax returns for tax years in 2018 through 2020 remain subject to potential examination by the taxing authorities.
Stock-based compensation
In December 2004, the FASB issued FASB ASC No. 718, Compensation - Stock Compensation (“ASC No. 718”). Under ASC No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation - Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.
Net income (loss) per share
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 no potentially dilutive shares outstanding as of December 31, 2020, and December 31, 2019, respectively.
Accounting for Leases
In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). effective for fiscal year beginning after December 15, 2018. ASU 2016-02 requires the recognition of lease assets and lease liabilities on the balance sheet for leases classified as operating, direct financing or sales type leases. The Company adopted the provisions of ASC 842 for the year ended December 31, 2019. Prior to 2019, the Company had no leases which required retroactive application. For the years ended December 31, 2020 and 2019, the Company had agreements that qualified as operating leases. See Note 10 for details. For the year ended December 31, 2020, the Company had agreements that qualified as financing leases. See Note 4 for details.
Concentrations of debt financing
The Company has line of credit agreements with companies owned and operated by the Company’s CEO and majority shareholder. See Note 6 for further discussion of line of credit terms and relationships.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through December 31, 2020.
The Company has a concentration of credit risk note with a related party and majority shareholder. See Note 6 for further discussion of these sources.
Concentration of revenue sources
The Company has a concentration of revenue sources with companies owned and operated by related parties.
Fair Value
The carrying amounts reported in the balance sheet for cash, receivables, prepaid expenses, accounts payable and notes payable approximate their estimated fair market value based on the short-term maturity of this instrument. The carrying value of the Company’s loans receivable approximate fair value because their terms approximate market rates.
Recently Issued Accounting Pronouncements
Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments introduce an impairment model that is based on expected credit losses (“ECL”), rather than incurred losses, to estimate credit losses on certain types of financial instruments (ex. loans and held to maturity securities), including certain off-balance sheet financial instruments (ex. commitments to extend credit and standby letters of credit that are not unconditionally cancelable). The ECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. Financial instruments with similar risk characteristics may be grouped together when estimating the ECL. The ASU also amends the current available for sale security impairment model for debt securities whereby credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The amendments will be applied through a modified retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently planning for the implementation of this accounting standard. It is too early to assess the impact this guidance will have on the Company’s financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU clarify the proper classification for certain cash receipts and cash payments, including clarification on debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, among others. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company adoption of this amendment did not have a material impact on the Company’s Financial Statements.
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 December 31, 2020, the Company has an accumulated deficit of $2,496,953, net cash outflow from operating activities of $205,760, and a net loss for the current year of $452,898. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. 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.
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 48 months with payments of $5,003 per month. At the end of the lease, the related party has the right to purchase the asset for $22,800. The lease is classified as a financing lease under ASC 842. The present value of the lease payments, excluding the end of lease provisions, discounted at an interest rate of 10%, is $197,442. The Company is using the net book value of $180,500 of the asset as the initial value of the lease in accordance with ASC 842-30-55-17A.
The undiscounted cash flow principal payments for the remaining term of the lease will be as follows:
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 60 months with payments of $1,000 per month. At the end of the lease, the related party has the right to purchase the vehicle for $37,000. The lease is classified as a financing lease under ASC 842. The present value of the lease payments, excluding the end of lease provisions, discounted at an interest rate of 10%, is $47,065. The Company is using the net book value of $69,000 of the asset as the initial value of the lease in accordance with ASC 842-30-55-17A.
The undiscounted cash flow principal payments for the remaining term of the lease will be as follows:
Income from both leases is reflected on the statement of operations as interest income - related parties. For the year ended December 31, 2020 interest income of $24,771 was reported.
NOTE 5 - PROPERTY & EQUIPMENT
Property and equipment consists of the following at December 31, 2020 and 2019:
Depreciation expense for the years ended December 31, 2020 and 2019 was $59,785 and $63,743 respectively.
On November 12, 2019, the Company acquired for $190,000 a 2008 Freightliner truck and a 2007 Featherlite trailer for use in the business operations.
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 financing lease. The cost of the vehicle and related accumulated depreciation has been reclassified to a lease receivable and is reflected on the balance sheet as lease receivable - related party. See Note 4 for details.
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 $450,000 with an extended maturity date of December 31, 2023, bearing interest of 10% per annum. Effective July 1, 2019, the loan was assumed by FinTekk AP, LLC, a California limited liability company (“Fintekk”). The terms of the line of credit are unchanged. Both DEVCAP and FinTekk are solely owned by the majority shareholder of the Company and are related parties. As of December 31, 2020, and 2019, the balance of the line of credit was $226,385 and $135,365, respectively. The Company recorded accrued interest of $27,374 and $13,044 on the line of credit at December 31, 2020 and 2019, respectively.
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 $450,000. The line of credit is a demand loan bearing interest of 10% per annum. General Pacific Partners, LLC is a related party to the Company as it is owned by a majority shareholder of the Company. On July 5, 2017, the balance of $25,000 was converted into 500,000 shares of stock valued at $.05 per share. The balance of the line of credit was $0 as of December 31, 2020, and 2019. The Company owes accrued interest of $4,732 as of December 31, 2020 and 2019, respectively.
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 $950,000 bearing interest at 10%, maturing December 2023. As of December 31, 2020, and 2019, the balance due on the line was $640,626 and $490,000, respectively. The Company recorded accrued interest of $94,600 and $34,287 as of December 31, 2020 and 2019, respectively
NOTE 7 - LONG-TERM LIABILITIES - RELATED PARTY
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. The Company recorded accrued interest on this loan of $145,632 ,as of December 31, 2019 and 2020 respectively. The accrued interest was not part of the conversion agreement and continues to be reflected as a liability.
On October 1, 2017, the Company acquired from Gemini Southern, LLC a 2006 Ultra-Comp 53” NASCAR type vehicle transport hauler (the “Hauler”) to be used for promotional / advertising services. The purchase price of the Hauler was $165,000. The Company paid for the Hauler with a promissory note (the “Hauler Note”). The Hauler Note bears interest at 12% per annum and is payable as follows: (i) interest only from October 1, 2017 through February 28, 2018; (ii) $ $3,670 per month from March 1, 2018 through February 28, 2022; and $45,000 on February 1, 2022. The trailer is collateral for the promissory note. The balance of the loan was $83,679 and $115,567 as of December 31, 2020 and 2019, respectively.
Principal payments for the next five years will be as follows:
On December 22, 2018, the Company leased a vehicle from the majority shareholder. The term of the lease is 84 months with payments of $423 per month. At the end of the lease the Company can purchase the vehicle for $2,500. As of December 31, 2020, it is reasonably expected that the Company will exercise the purchase option. The value of the right of use asset and corresponding liability at the date of inception was $30,089, the net present value of the lease payments, including the purchase option, using an interest rate of 6.649% in accordance with the provisions of ASC 842. The right of use asset is included in property and equipment as a leased asset.
The undiscounted cash flow principal payments for the next five years will be as follows:
On August 1, 2020, the Company borrowed $69,000 from an unrelated party to purchase a 2020 Porsche Maran that was subsequently leased to a related party. See Note 4 for details of the lease agreement. The term of the loan is 60 months with payments of $912 per month with interest at 10%. A final payment of $42,713.55 is due in August 2025. The loan is secured by the vehicle.
Principal payments for the next five years will be as follows:
NOTE 8 - OTHER RELATED PARTY TRANSACTIONS and RELATED PARTIES ACCOUNTS PAYABLE
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 $7,500 a month for consulting services to be provided to the Company such as marketing, architectural development, accounting, finance, corporate structure and tax planning. Effective July 1, 2019, the agreement was transferred to FinTekk AP, LLC (“FinTekk”). All amounts due to DEVCAP and all future services will be assumed by FinTekk. For the years ended December 31, 2020 and 2019, the Company recorded consulting fee expense of $95,000 and $105,000 respectively. The amount due but unpaid is $243,825 and $246,985 at December 31, 2020 and 2019, respectively, and is included in accounts payable related parties on the balance sheets.
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 December 31, 2020 and 2019, 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 $17,500 at December 31, 2020 and 2019, respectively, and was included on the balance sheet as accounts payable - related parties.
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 years ended December 31, 2020 and 2019, the Company recorded consulting fee expense of $42,000 and $18,000 respectively. As of December 31, 2020, and 2019, the amount due but unpaid was $3,000 and $1,500, respectively and is included in accounts payable - related parties on the balance sheet.
Expense reimbursements
The majority shareholder of the Company pays certain ongoing operating costs from personal funds and is periodically reimbursed. As of December 31, 2020 and 2019, the amounts due to the shareholder was $29,250 and $28,750 and is reflected in accounts payable - related parties on the balance sheet.
Other related party transactions
On January 9, 2019, the Company leased a 2018 Ford truck for a term of two years at $425 per month. The truck was acquired December 22, 2018 from the majority shareholder as described in Note 10. The lessee is an outside consultant for the Company. Additionally, as of December 31, 2020, there was an outstanding payable balance of $10,006 from related parties.
NOTE 9 - STOCKHOLDERS’ EQUITY (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 $0.001. The Company amended its articles of incorporation to increase it authorized shares to 200,000,000 shares of common stock and 20,000,000 shares of preferred stock, both $0.001 par value.
NOTE 10 - OPERATING LEASES
Operating Leases - Lessee
On December 22, 2018, the Company leased a vehicle from the majority shareholder. See further details of this lease in Note 7.
Operating Leases - Lessor
The Company entered into an agreement with a principal vendor for the lease of a Company vehicle. The lease is classified as a lessor operating lease under ASC 842. The term of the lease is 24 months, effective January 2019 and expiring December 2020. Depreciation expense for the vehicle subject to the lease is provided on the straight-line method over the useful life of the vehicle in accordance with the Company’s normal depreciation policy. Estimated and actual residual values are reviewed on a regular basis to determine that depreciation amounts are appropriate. Depreciation expense related to the vehicle was $6,018 for the years ended December 31, 2020 and 2019.
Investments in operating leases are as follows at December 31:
NOTE 11 - INCOME TAXES
Deferred tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the period in which the differences are expected to affect taxable income. Legislation passed in December 2017 changed the tax rate on corporate income for tax years beginning in 2018 to 21% at all levels of income. This rate is used to determine the deferred tax effect in future years. The Company’s deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers would be limited under the Internal Revenue Code should a significant change in ownership occur within a three-year period. In 2020 and 2019, the Company’s tax losses were reduced by accrued expenses to related parties which are not recognized for tax purposes until paid.
At December 31, 2020 and 2019, the Company had net operating loss carryforwards of approximately $2,011,000 and $1,627,000, respectively, of which approximately $1,250,000 will begin to expire in 2037 and the remainder is carried forward indefinitely.
Deferred tax assets consisted of the following:
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income and tax planning strategies in making this assessment. Based on management’s analysis, they concluded not to retain a deferred tax asset since it is uncertain whether the Company can utilize this asset in future periods. Therefore, they have established a full reserve against this asset. The change in the valuation allowance in 2020 and 2019 was $86,187 and $79,957, respectively.
A reconciliation of the expected tax computed at the U.S. statutory federal income tax rate to the total benefit for income taxes at December 31, 2020 and 2019 is as follows:
The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2020, and 2019, the Company had no accrued interest and penalties related to uncertain tax positions.
The Company has not filed an income tax return since inception in the U.S. and California and therefore subject to examination by tax authorities for the years 2013 and forward The Company is not currently under examination by any tax authority.
Management has evaluated tax positions in accordance with FASB ASC 740, and has not identified any tax positions, other than those discussed above, that require disclosure.
NOTE 12-CONTINGENCIES AND COMMITMENTS
The Company’s ability to collect on receivables and pay liabilities is connected to NASCAR race schedule. The 2020 NASCA schedule was severely disrupted by Covid, which caused delays in both collections and payments. Management believes the 2021 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.
NOTE 13 - SUBSEQUENT EVENTS
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. Overall, revenues and expenses for 2020 were consistent with prior periods. The Company did not experience a significant detrimental change. Management believes the 2021 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.