SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2011

 

OR

 

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

 

From the transition period from ___________ to ____________.

 

Commission File Number 333-150829

 

HALL TEES, INC.

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

 

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

 

 

7405 Armstrong, Rowlett, Texas 75088

(Address of principal executive offices)

 

  (214) 883-0140

(Issuer's telephone number)

N/A

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

 

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

 

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

 

	Large Accredited Filer	[   ]	Accelerated Filer	[   ]
	Non-Accredited Filer	[   ]	Smaller Reporting Company	[X]

Indicate by a check mark whether the company is a shell company (as defined by Rule 12b-2 of the Exchange Act:  Yes []   No [  X  ].

 

As of November 14, 2011, there were 7,605,400 shares of Common Stock of the issuer outstanding.

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

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

 

 

 

 

 

 

 

 

 

 

HALL TEES, INC. Consolidated Balance Sheets September 30, 2011 and December 31, 2010

 

 

		2011 (Unaudited)				2010
ASSETS
Current Assets
Cash and Cash Equivalents		$	151,953			$	189,154
Accounts Receivable, Net			4,418				1,113
Total Current Assets			156,371				190,267
Fixed Assets, Net			65,339				81,221
TOTAL ASSETS		$	221,710			$	271,488
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses			36,195				24,358
Amounts due Shareholder			42,476				37,493
Current Portion of Capital Lease			5,844				5,844
Total Current Liabilities			84,515				67,695
Long Term Liabilities
Capitalized Lease Obligation			7,305				11,688
Less: Current Portion			(5,844	)			(5,844	)
Total Long Term Liabilities			1,461				5,844
Total Liabilities			85,976				73,539
Shareholders' Equity
Preferred Stock, $.001 par value, 25,000,000 shares authorized,
0 and 0 shares issued and outstanding			0				0
Common Stock, $.001 par value, 50,000,000 shares authorized,
7,605,400 and 7,605,400 shares issued and outstanding			7,605				7,605
Additional Paid-In Capital			365,095				365,095
Accumulated Deficit			(236,966	)			(174,751	)
Total Shareholders' Equity			135,734				197,949
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	221,710			$	271,488

 

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

 

 

 

 

 

 

HALL TEES, INC. Consolidated Statements of Operations For the Three and Nine months ended September 30, 2011 and 2010

(Unaudited)

 

 

		Three Months Ended								Nine Months Ended
		September 30, 2011				September 30, 2010				September 30, 2011				September 30, 2010
REVENUE		$	33,322			$	29,645				50,092				58,469
COST OF SALES			17,851				22,159				29,235				35,293
GROSS PROFIT			15,471				7,486				20,857				23,176
OPERATING EXPENSES
Depreciation			5,260				5,115				15,882				14,080
Selling and Advertising Expenses			3,804				0				6,867				1,251
Other General Expenses			23,136				35,605				60,622				67,111
TOTAL OPERATING EXPENSES			32,200				40,720				83,371				82,442
NET OPERATING LOSS			(16,729	)			(33,234	)			(62,514	)			(59,266	)
OTHER INCOME
Interest Income			85				168				299				302
NET LOSS BEFORE INCOME TAXES			(16,644	)			(33,066	)			(62,215	)			(58,964	)
Provision for Income Taxes (Expense) Benefit			0				0				0				0
NET LOSS		$	(16,644	)		$	(33,066	)			(62,215	)			(58,964	)
EARNINGS PER SHARE, Basic and Diluted
Weighted Average of Outstanding Shares			7,605,400				7,605,400				7,605,400				7,353,917
Income (Loss) for Common Shareholders		$	(0.00	)		$	(0.00	)			(0.01	)			(0.01	)

 

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

 

 

 

 

 

 

HALL TEES, INC. Consolidated Statement of Changes in Shareholders’ Equity(Deficit) For the Nine months ended September 30, 2011 and The Year Ended December 31, 2010

 

 

			Common Stock								Paid-In				Accumulated
			Shares				Amount				Capital				(Deficit)				Totals
Shareholders' Deficit,
January 1, 2010			7,000,000			$	7,000			$	63,000			$	(91,946	)		$	(21,946	)
Issuance of Stock for Cash			605,400				605				302,095				0				302,700
Net Loss															(82,805	)			(82,805	)
Shareholders' Equity,
December 31, 2010			7,605,400			$	7,605			$	365,095			$	(174,751	)		$	197,949
Net Loss															(62,215	)			(62,215	)
Shareholders' Equity,
September 30, 2011 (Unaudited)			7,605,400			$	7,605			$	365,095			$	(236,966	)		$	135,734

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

HALL TEES, INC. Consolidated Statements of Cash Flows For the Nine months ended September 30, 2011 and 2010

(Unaudited)

 

		2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		$	(62,215	)		$	(58,964	)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation			15,882				14,080
Bad Debt Expense			1,442				2,027
Changes in assets and liabilities:
Accounts Receivable			(4,747	)			(7,882	)
Accounts Payable			2,500				(29,141	)
Accrued Expenses			9,337				9,031
Net Cash Used for Operating Activities			(37,801	)			(70,849	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed Assets			0				(32,922	)
CASH FLOWS FROM FINANCING ACTIVITIES
Capitalized Lease Payments			(4,383	)			(4,383	)
Proceeds from Sale of Stock			0				302,700
(Payments) Borrowings: Shareholder Advances			4,983				4,003
Net Cash Provided by Financing Activities			600				302,320
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS			(37,201	)			198,549
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			189,154				3,469
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	151,953			$	202,018
SUPPLEMENTAL DISCLOSURES
Cash Paid During the Year for Interest Expense		$	0			$	0
Cash Paid During the Year for Taxes		$	0			$	0

 

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

 

 

 

 

 

 

HALL TEES, INC.

NOTES TO FINANCIAL STATEMENTS

September 30, 2011

 

 

 

NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Activities, History and Organization:

 

Hall Tees, Inc. (The “Company”) operates as a printer and silk screener.  The Company is located in Rowlett, Texas and was incorporated on September 13, 2007 under the laws of the State of Nevada.

 

Hall Tees, Inc., is the parent company of Hall Tees & Promotions, L.L.C., (“Hall Tees Texas”), a company incorporated under the laws of the State of Texas. Hall Tees Texas was established in 2007 and for the past fifteen months has been operating a single facility in Texas.

 

On September 12, 2007, Hall Tees, Inc. ("Hall Tees Nevada"), a private holding company established under the laws of Nevada, was formed in order to acquire 100% of the outstanding membership interests of Hall Tees Texas.  On September 15, 2007, Hall Tees Nevada issued 7,000,000 shares of common stock in exchange for a 100% equity interest in Hall Tees Texas.  As a result of the share exchange, Hall Tees Texas became the wholly owned subsidiary of Hall Tees Nevada.  As a result, the members of Hall Tees Texas owned a majority of the voting stock of Hall Tees Nevada.  The transaction was regarded as a reverse merger whereby Hall Tees Texas was considered to be the accounting acquirer as its members retained control of Hall Tees Nevada after the exchange, although Hall Tees Nevada is the legal parent company.  The share exchange was treated as a recapitalization of Hall Tees Nevada.  As such, Hall Tees Texas (and its historical financial statements) is the continuing entity for financial reporting purposes. The financial statements have been prepared as if Hall Tees Nevada had always been the reporting company and, on the share exchange date, changed its name and reorganized its capital stock.

 

Unaudited Interim Consolidated Financial Statements:

 

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable Securities and Exchange Commission (“SEC”) regulations for interim financial information. These financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to present fairly the balance sheets, statements of operations and statements of cash flows for the periods presented in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. It is presumed that users of this interim financial information have read or have access to the audited financial statements and footnote disclosure for the preceding fiscal year contained in the Company’s Annual Report on Form 10-K. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

 

Significant Accounting Policies:

 

The Company’s management selects accounting principles generally accepted in the United States of America and adopts methods for their application.  The application of accounting principles requires the estimating, matching and timing of revenue and expense.  Below is a summary of certain significant accounting policies selected by management.

 

The consolidated financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company's system of internal  accounting control is designed to assure, among other items, that  1) recorded  transactions  are valid;  2) valid  transactions  are recorded;  and  3) transactions  are  recorded in the proper  period in a timely  manner to produce financial  statements which present fairly the financial  condition,  results of operations  and cash  flows of the  Company  for the  respective  periods  being presented.

 

Management believes that all adjustments necessary for a fair statement of the results of the nine months ended September 30, 2011 and 2010 have been made.

 

 Basis of Presentation:

 

The Company prepares its consolidated financial statements on the accrual basis of accounting.  All intercompany balances and transactions are eliminated.  The Company’s subsidiaries are consolidated with the parent company.

 

 

 

Cash and Cash Equivalents:

 

All highly liquid investments with original maturities of six months or less are included in cash and cash equivalents.  All deposits are maintained in FDIC insured depository accounts in local financial institutions and balances are insured up to $250,000.

 

Fair Value of Financial Instruments:

 

The carrying amounts of cash, cash equivalents, accounts receivable, capital leases, accounts payable and notes payable approximate their fair values due to the short-term maturities of these instruments.

 

Accounts Receivable:

 

Accounts receivable are carried at their face amount, less an allowance for doubtful accounts.  On a periodic basis, the Company evaluates accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions, based on a history of write offs and collections.  The Company’s policy is generally not to charge interest on trade receivables after the invoice becomes past due.  A receivable is considered past due if payments have not been received within agreed upon invoice terms.   The Company provides an allowance for all receivables that are greater than 90 days old. Allowances for Doubtful Accounts totaled $3,000 at September 30, 2011 and December 31, 2010.  Write offs are recorded at a time when a customer receivable is deemed uncollectible.

 

Inventory:

 

Inventory is comprised of purchased garments or t-shirts for re-sale.   The Company uses the FIFO method for inventory tracking and valuation and calculates inventory at each period end.  Inventory is stated at the lower of cost or market value.  At September 30, 2011 and December 31, 2010 there was $0 of inventory.

 

Fixed Assets:

 

Fixed assets are stated at cost if purchased, or at fair value in a nonmonetary exchange, less accumulated depreciation.  Major renewals and improvements are capitalized; minor replacements, maintenance and repairs are charged to current operations. Depreciation is computed by applying the straight-line method over the estimated useful lives which are generally three to seven years.  Leases that meet the requirements of ASC 840-10, are capitalized and included in fixed assets.

 

Revenue Recognition:

 

The Company recognizes revenue in accordance with ASC 605-10. Revenue will be recognized only when all of the following criteria have been met:

 

·

Persuasive evidence of an arrangement exists;

·

Ownership and all risks of loss have been transferred to buyer, which is generally upon shipment or at the time the service is provided;

·

The price is fixed and determinable; and

·

Collectability is reasonably assured.

 

Earnings per Share:

 

Earnings per share (basic) is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding for the period covered.  As the Company has no potentially dilutive securities, fully diluted earnings per share is identical to earnings per share (basic).

 

Income Taxes:

 

Income from the corporation is taxed at regular corporate rates per the Internal Revenue Code.  There are no provisions for current taxes due to net available operating losses.

 

Recent Accounting Pronouncements:

 

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

Use of Estimates:

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

 

 

 

 

NOTE 2 – FIXED ASSETS

 

Fixed assets at September 30, 2011 and December 31, 2010 are as follows:

		2011				2010
Furniture & Equipment		$	102,920			$	102,920
Capitalized Leases			29,220				29,220
Gross Fixed Assets			132,140				132,140
Less: Accumulated Depreciation			(66,801	)			(50,919	)
Net Fixed Assets		$	65,339			$	81,221

 

 

NOTE 3 – CAPITALIZED AND OPERATING LEASES

 

The Company entered into a capitalized lease obligation during 2008 for a total of $29,220. Payments of $487 including principal and interest at 12% are due monthly through December 2012. The amount due by December 31, 2011 is $1,461 and $5,844 is due within the next 12 months. The total amount outstanding at September 30, 2011 and December 31, 2010 was $7,305 and $11,688, respectively.

 

Accumulated depreciation related to the capitalized leases for the nine month period ended September 30, 2011 and December 31, 2010 was $6,507 and $5,752, respectively.

 

The Company leases a 1,200 square foot warehouse space on a month to month basis for $1,000 per month. Rent expense was $9,000 for the nine month periods ended September 30, 2011 and 2010.

 

 

NOTE 4 – EQUITY

 

The Company is authorized to issue 25,000,000 preferred shares at a par value of $0.001 per share. These shares have full voting rights.  At September 30, 2011 and December 31, 2010, there were zero shares outstanding.

 

The Company is authorized to issue 50,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights.  At September 30, 2011 and December 31, 2010, there were 7,605,400 shares outstanding respectively.

 

On December 23, 2009, our Form S-1/A that was filed on December 7, 2009, became effective.  Under this registration statement the Company raised $302,700 by selling 605,400 shares at $0.50 per share and the offering was closed on May 11, 2010.

 

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

 

 

 NOTE 5 – INCOME TAXES

 

The Company has adopted ASC 740, which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset).   Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be.

 

Deferred tax assets at September 30, 2011 and December 31, 2010 consisted of the following:

 

		2011				2010
Deferred Tax Asset		$	59,240			$	43,690
Less: Valuation Allowance			(59,240	)			(43,690	)
Net Deferred Tax Asset		$	0			$	0

 

The net deferred tax asset generated primarily by the Company’s net operating loss carryforward has been fully reserved. The cumulative net operating loss carry-forward is approximately $236,966 at September 30, 2011 and $174,751 at December 31, 2010, and will expire in 2030.

 

The difference in the income tax benefit not shown in the consolidated statements of operations and the amount that would result if the U.S. Federal statutory rate of 25% were applied to pre-tax loss for 2011 and 2010 is attributable to the valuation allowance.

 

 

 

The realization of deferred tax benefits is contingent upon future earnings, therefore, is fully reserved at September 30, 2011 and December 31, 2010.

 

 

The Company recognizes interest and penalties related to unrecognized tax benefits in general and administrative expense. During the nine months ended September 30, 2011 and the year ended December 31, 2010 the Company recognized no interest and penalties.

 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

The President and a Shareholder of the Company has advanced the Company $42,476 and $37,493 as of September 30, 2011 and December 31, 2010, respectively, for working capital. No interest is paid on this advance.

 

Under a contract with the Company beginning November 6, 2007 and ending December 31, 2011, the President provides general management services to the Company for up to $4,000 per month.  Payroll expense incurred under this contract totaled approximately $4,800 and $2,300 for the three months ended September 30, 2011 and 2010, respectively, and $9,760 and $8,500 for the nine months ended September 30, 2011 and 2010, respectively.

 

The Company pays rent of $1,000 per month to the President for warehouse facilities.  Total charges were $9,000 in each of the nine months ended September 30, 2011 and 2010.

 

 

NOTE 7– FINANCIAL CONDITION AND GOING CONCERN

 

The Company has minimal operations and has working capital of approximately $71,900 at September 30, 2011 and $122,600 as of December 31, 2010. This positive working capital at September 30, 2011 is a result of raising $302,700 in May 2010 under the Form S-1/A that was filed on December 7, 2009 and became effective on December 23, 2009.  Without this money the working capital at September 30, 2011 would have been negative.  Because of this negative amount and limited operating history and limited operations, the Company may require additional working capital to survive. If the funds the Company has are not sufficient it will also consider bank loans or additional shareholder loans. There are no assurances that the Company will be able to obtain any of these. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital cannot be generated, the Company may not be able to continue its operations.

 

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 

NOTE 8 – REVENUE CONCENTRATION

 

The Company’s four largest customers account for 48% ($23,916) of the 2011 year-to-date revenues. The table below discloses the customers and their sales revenue for the nine months ending September 30, 2011 and 2010.

 

		YTD 2011 Sales		YTD 2010 Sales
Customer		$	%	$	%
Lobo		8,060	16%	5,094	9%
KOOLVEST		7,873	16%	372	1%
AMSOIL		4,238	8%	-	0%
Tri-State		3,745	7%	-	0%
BMW-Plano		2,934	6%	-	0%
Details, LTD		2,430	5%	-	0%
Other		20,812	42%	53,003	90%
TOTAL		50,092	100%	58,469	100%

 

 

 

 

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS

 

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

 

General

 

In the first six months of 2011 we saw top line revenue continue to soften due to the cool wet weather in North Texas (impacted the KoolVest sales) in the early part of the year and the reduction in volume from our largest customer in 2010, DIRECTECH. With the economy still sputtering and with Companies closely managing marketing spending we anticipate reduced revenue versus 2010.  Revenue in the nine months ended September 30, 2011 was down by 14% versus the same period in 2010.

 

 

RESULTS FOR THE NINE MONTHS ENDED September 30, 2011

 

Our quarter ended on September 30, 2011.  Any reference to the end of the fiscal quarter refers to the end of the third quarter for the period discussed herein.

 

REVENUE.  Revenue for the three months ended September 30, 2011 was $33,322 compared to $29,645 for the three month period ended September 30, 2010, and revenue for the nine months ended September 30, 2011 was $50,092 compared to $58,469 for the nine month period ended September 30, 2010.  Revenue increased $3,677 or 12%, and decreased $8,377 or 14% in the three and nine months ended September 30, 2011, respectively. The increase is attributed to the KoolVest line that experienced a seasonal sales spike due to the hot summer. The decrease is attributed to the poor economic conditions and reduced marketing budgets at small companies and the sales reductions to existing customers. Most of this decrease is due to one customer, DIRECTECH ($4,408 for three months and $11,581 for nine months), as they have significantly reduced their discretionary marketing spending. Overall, for the three and nine months ended September 30, 2011, new and existing customers were up $31,600 and $38,625, respectively, and lost / reduced volume customers were down $27,900 and $47,000, respectively.

 

COST OF SALES: Cost of sales (COS) were $17,851 (or 54% of revenue) for the three months ended September 30, 2011 compared to $22,159 (or 75% of revenue) for the same period in 2010. COS were $29,235 (58%) for the nine months ended September 30, 2011 compared to $35,293 (60%) for the same period in 2010.  The decrease in COS is due to product mix shifts toward KoolVest.

 

OPERATING EXPENSES. Operating expenses, exclusive of depreciation expense of $5,260 and $5,115, were $26,940 and $35,605 for the three month periods ended September 30, 2011 and 2010 respectively.  The company looks to reduce cost where possible. Operating expenses, exclusive of depreciation expense of $15,882 and $14,080, were $67,489 and $68,362 for the nine month periods ended September 30, 2011 and 2010 respectively. The decrease in expenses is related to reduced professional fees.

 

NET LOSS. The net loss for the three months ended September 30, 2011 and 2010 was $16,644 versus $33,066, respectively, and $62,215 versus $58,964, respectively, for the nine month period ended September 30, 2011 and 2010.  The main driver behind the changes in the net loss were the increased sales volume in the three month period and the reduced sales (volume) in the nine month period as discussed above. 

 

 

 

 

 

LIQUIDITY AND CAPITAL RESOURCES.

 

In addition to the preceding, the Company plans for liquidity needs on a short term and long term basis as follows:

 

Short Term Liquidity:

 

The Company relies on one primary funding source for short term liquidity needs: advances from the major shareholder / President of the Company. The President has advanced the Company $42,476 and $37,493 as of September 30, 2011 and December 31, 2010, respectively, for working capital.  No interest is paid on this advance.  This is also disclosed in Note 6.

 

Long Term Liquidity:

 

The long term liquidity needs of the Company are projected to be met primarily through the cash flow provided by operations. Cash flow from operations for the nine months ended September 30, 2011 was approximately negative $37,800.  The Company continually is seeking new opportunities especially with the asset investment from 2010 to spur sales and increase top line revenue.

 

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

 

 

Capital Resources

 

In January 2008, the Company entered into a capital lease commitment that has a term of five years, ending December 2012.  The general purpose of the lease commitment is for equipment that is used in the Company’s operations of printing and puts us on the cutting edge of “Direct to Garment” printing as discussed above.  Annual commitments are $5,844 with a total five year commitment of $29,220.  The balance due at September 30, 2011 was $7,305 and at December 31, 2010 was $11,688.  The funds to fulfill this commitment will be primarily sourced through operations.  As of September 30, 2011 the Company had negative cash used for operating activities of $37,800, and with the implementation of its business plan, forecasts cash flows to be sufficient to source payment of this commitment.

 

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

 

Material Changes in Financial Condition

 

WORKING CAPITAL: Working Capital decreased by approximately $50,700 to $71,900 since December 31, 2010.  This decrease is due to the reduction in cash of about $37,200 and increased accounts payable and accrued expenses of $11,800.

 

SHAREHOLDERS’ EQUITY: Shareholders’ Equity decreased by approximately $62,200 due to the net loss.   

  

 

 

Item 3: Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2011.  This evaluation was accomplished under the supervision and with the participation of our chief executive officer / principal executive officer, and chief financial officer / principal financial officer who concluded that our disclosure controls and procedures are not effective.

 

Based upon an evaluation conducted for the period ended September 30, 2011, our Chief Executive and Chief Financial Officer as of September 30, 2011 and as of the date of this Report, has concluded that as of the end of the periods covered by this report, we have identified the following material weakness of our internal controls: 

 

·

Reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transaction.

 

·

Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.

 

In order to remedy our existing internal control deficiencies, as our finances allow, we will hire additional accounting staff.

 

Changes in Internal Controls over Financial Reporting

 

We have not yet made any changes in our internal controls over financial reporting that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

 

PART II

 

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

 

 

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

 

None noted

(b) Exhibits

 

 

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

 

 

 

 

SIGNATURES

 

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

HALL TEES, INC.

 

By /s/ William Lewis

William Lewis, President, CFO

 

Date: November 14, 2011