Company Quick10K Filing
RC-1
Price-0.00 EPS-0
Shares14 P/E0
MCap-0 P/FCF-0
Net Debt-0 EBIT-0
TEV-0 TEV/EBIT2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-04-14
10-Q 2019-09-30 Filed 2019-11-13
10-Q 2019-06-30 Filed 2019-08-19
10-Q 2019-03-31 Filed 2019-05-20
10-K 2018-12-31 Filed 2019-04-11
10-Q 2018-09-30 Filed 2018-11-19
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-16
10-K 2017-12-31 Filed 2018-04-03
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-17
10-Q 2017-03-31 Filed 2017-05-12
10-K 2016-12-31 Filed 2017-04-06
10-Q 2016-09-30 Filed 2016-11-18
10-Q 2016-06-30 Filed 2016-08-12
8-K 2020-02-07

RCCC 10Q Quarterly Report

Part I - Financial Information
Item 1. Condensed Financial Statements
Note 1. Organization and Description of Business Operations
Note 2. Summary of Significant Accounting Policies
Note 3. Going Concern
Note 4. Fixed Assets
Note 5. Note Receivable - Related Party
Note 6. Lease Receivable - Related Party
Note 7. Lines of Credit
Note 8. Stockholders' Equity
Note 9. Related Party Transactions
Note 10. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Default Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 rc1_ex3101.htm
EX-31.2 rc1_ex3102.htm
EX-32.1 rc1_ex3201.htm
EX-32.2 rc1_ex3202.htm

RC-1 Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
330325102191-125943-354077-582211-8103452015201620182020
Assets, Equity
13500092735504708205-34060-763252015201620182020
Rev, G Profit, Net Income
45000272009400-8400-26200-440002015201620182020
Ops, Inv, Fin

10-Q 1 rc1_10q-033120.htm FORM 10-Q

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ______________ to _____________

 

Commission file number 333-210960

 

RC-1, INC.

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

 

Nevada 26-1449268
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

 

110 Sunrise Center Drive

Thomasville, NC 27360

(Address of principal executive offices)

 

800.348.2870

(Issuer’s telephone number)

_______________________________________________

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
N/A N/A N/A

 

Check whether the issues (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 o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

  Large accelerated filer  o Accelerated filer  o
  Non-accelerated filer  o Smaller reporting company  x
  Emerging growth company  o  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

There were 13,929,581 shares of the registrant’s common stock, $0.001 par value per share, outstanding on May 12, 2020.

 

 

 

   

 

 

RC-1, INC.

 

TABLE OF CONTENTS

 

      Page
       
Part I – FINANCIAL INFORMATION  
     
  Item 1. Condensed Financial Statements: 1
       
    Balance Sheets at March 31, 2020 (unaudited) and December 31, 2019 1
       
    Condensed Statements of Operations for the three month period ended March 31, 2020 and 2019 (unaudited) 2
       
    Condensed Statements of Shareholders Equity for the three month periods ended March 31, 2020 and 2019 (unaudited) 3
       
    Condensed Statements of Cash Flows for the three month period ended March 31, 2020 and 2019 (unaudited) 4
       
    Notes to Condensed Financial Statements (unaudited) 5
       
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 10
       
  Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
       
  Item 4. Controls and Procedures 16
       
Part II – OTHER INFORMATION  
       
  Item 1.  Legal Proceedings 17
       
  Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 17
       
  Item 3. Defaults Upon Senior Security 17
       
  Item 4. Mine Safety Disclosures 17
       
  Item 5. Other Information 17
       
  Item 6. Exhibits 17
       
    Signatures 18

 

 

 

 i 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. Condensed Financial Statements

 

RC-1, Inc.

BALANCE SHEETS

 

   (Unaudited)     
   March 31,   December 31, 
   2020   2019 
ASSETS          
           
Current assets          
Cash  $49,590   $50,106 
Note receivable – related party   42,360    50,000 
Lease receivable – related party   153,826     
Interest receivable – related parties   4,036    892 
Total current assets   249,812    100,998 
           
Long-term assets          
Property and equipment - net   6,606    7,157 
Lease receivable – related party – net of current portion   133,397     
Total long-term assets   140,003    7,157 
           
Total Assets  $389,815   $108,155 
           
           
LIABILITIES & STOCKHOLDERS' DEFICIT          
           
Current liabilities          
Accounts payable  $47,867   $29,668 
Accrued liabilities - related party   176,335    161,601 
Note payable – related party   141,790     
Line of credit, current portion   75,000    75,000 
Line of credit to related parties   5,897    18,964 
Accrued interest payable   46,793    44,918 
Accrued interest – related parties   124,279    119,471 
Total current liabilities   617,961    449,622 
           
Note payable, net of current portion   145,710     
Total long-term liabilities   145,710     
           
Total Liabilities   763,671    449,622 
           
Stockholders' Deficit          
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding        
Common stock, $0.001 par value; 190,000,000 shares authorized; 13,929,581 shares issued and outstanding   13,930    13,930 
Additional paid in capital   2,895,024    2,865,024 
Common stock issuable   90,000    120,000 
Accumulated deficit   (3,372,810)   (3,340,421)
Total Stockholders' Deficit   (373,856)   (341,467)
           
Total Liabilities and Stockholders' Deficit  $389,815   $108,155 

 

The accompanying notes are an integral part of the condensed financial statements.

 

 

 

 1 

 

 

RC-1, Inc.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   Three Months Ended 
   March 31,   March 31, 
   2020   2019 
Revenues        
Consulting fees – related parties  $13,888   $24,668 
           
Operating expenses:          
Consulting - related parties   15,000    15,000 
General and administrative   5,747    18,051 
Professional fees   23,699    17,125 
    44,446    50,176 
           
Loss from operations   (30,558)   (25,508)
           
Other income (expense):          
Interest expense – unrelated parties   (1,875)   (1,875)
Interest expense – related parties   (4,808)   (347)
Interest income – related parties   4,852     
    (1,831)   (2,222)
           
Loss before provision for income tax   (32,389)   (27,730)
Provision for income tax        
           
Net loss  $(32,389)  $(27,730)
           
Net loss per share (Basic and fully diluted)  $(0.00)*  $(0.00)*
           
Weighted average number of common shares outstanding   13,929,581    13,929,581 

 

* denotes a loss of less than $(.01) per share.

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

 

 

 

 

 2 

 

 

RC-1, Inc.

CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT

(UNAUDITED)

 

   Common Stock   Additional      Common Stock           
       Amount   Paid in       Issuable/    Accumulated    Stockholders' 
   Shares   ($.0001 Par)   Capital      Receivable    Deficit    Deficit 
                              
Balance December 31, 2018   13,929,581   $13,930   $2,865,024    $ 120,000    $(3,291,436)   $(292,482)
                                   
Net loss for the period                       (27,730)    (27,730)
                                   
Balances March 31, 2019   13,929,581   $13,930   $2,865,024    $ 120,000    $(3,319,166)   $(320,212)
                                   
                                   
Balance December 31, 2019   13,929,581   $13,930   $2,865,024    $ 120,000    $(3,340,421)   $(341,467)
                                   

Shares to be cancelled at end of direct financing lease

           30,000       (30,000 )         
                                   
Net loss for the period                     (32,389)    (32,389)
                                   
Balances March 31, 2020   13,929,581   $13,930   $2,895,024    $ 90,000    $(3,372,810)   $(373,856)

  

The accompanying notes are an integral part of the unaudited condensed financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 3 

 

 

RC-1, Inc.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   Three Months Ended 
   March 31, 2020   March 31, 2019 
Cash Flows From Operating Activities:          
Net loss  $(32,389)  $(27,730)
           
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
Depreciation   551    3,051 
Non-cash rent expense       15,000 
           
Changes in operating assets and liabilities          
Decrease in lease receivable – related party   12,777     
Increase in interest receivable – related parties   (3,144)    
Increase (decrease) in accounts payable   14,734    (874)
Increase in accounts payable – related parties   18,199    26,950 
Increase in accrued interest – unrelated parties   1,875    1,875 
Increase in accrued interest – related party   4,808    346 
Net cash provided by operating activities   17,411    18,618 
           
Cash Flows From Investing Activities:          
Purchase of asset for financing lease   (300,000)    
Collections on notes receivable   7,640     
Net cash used in investing activities   (292,360)    
           
Cash Flows From Financing Activities:          
Proceeds from line of credit to related parties   279,061    56,000 
Proceeds from note payable to related parties   287,500     
Payments on line of credit to related parties   (292,128)   (74,862)
           
Net cash (used in) provided by financing activities   274,433    (18,862)
           
Net Decrease In Cash   (516)   (244)
           
Cash At The Beginning Of The Period   50,106    50,596 
           
Cash At The End Of The Period  $49,590   $50,352 
           
Schedule of Non-Cash Investing and Financing Activities          
           
Asset transferred in direct financing lease  $

300,000

   $ 
Supplemental Disclosure          
Cash paid for interest  $   $ 
           
Cash paid for income taxes  $   $ 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

 

 

 

 

 4 

 

 

RC-1, Inc.

NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

 

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS OPERATIONS

 

RC-1, Inc. (the “Company”), was incorporated in the State of Nevada on May 14, 2009. The Company is currently considered to be in the development stage, and has generated only limited revenues from its activities in the racing business. R-Course Promotions, LLC was formed in the State of California on October 30, 2007. On June 1, 2009, in a merger classified as a transaction between parties under common control, the sole membership interest owner in R-Course Promotions, LLC exchanged 125,000 membership interests for 1,786 common shares in RC-1, Inc. Subsequent to the consummation of the merger, R-Course Promotions, LLC ceased to exist. The results of operations of RC-1, Inc. and R-Course Promotions, LLC have been combined from October 30, 2007 forward through the date of merger.

 

The Company is a motorsports marketing business focused primarily in road racing events in North America utilizing NASCAR type competition equipment.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The Company’s condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Interim Condensed Financial Statements

 

The accompanying condensed financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete condensed financial statements. In our opinion the condensed financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the condensed financial statements not misleading. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the final results that may be expected for the year ended December 31, 2020. For more complete financial information, these unaudited condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 filed with the SEC.

  

Use of Estimates

 

The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and cash equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. The Company has no cash equivalents. The Company maintains cash with a commercial bank that at times may exceed federally insured limits. The deposits are made with a reputable financial institution and the Company does not anticipate realizing any losses from these deposits.

 

 

 

 5 

 

 

Property and equipment

 

Property and equipment are recorded at cost and depreciated under the straight line method over each item's estimated useful life. The Company uses a 5 year life for racecars and equipment, 7 years for furniture and fixtures. 

 

Financial Instruments

 

The Company measures its financial assets and liabilities in accordance with the requirements of FASB ASC 825 “Financial Instruments”. The carrying values of its lease receivables, accounts payable, note payable (current portion), line of credit, accrued expenses, and other current liabilities approximate fair value due to the short-term maturities of these instruments.

 

Revenue recognition

 

The Company adopted ASU 2014-09, “Revenue from Contracts with Customers” on January 1, 2018, using the modified retrospective method, which did not have a material impact on the timing and amount of product revenues.

 

The new revenue recognition standard prescribes a five-step model that focuses on transfer of control and entitlement to payment when determining the amount of revenue to be recognized. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

 

The majority of revenues are from consulting services provided at events which range from one day to one week in length. The Company also earns revenues from entering their race cars into events whereby there is a money purse for finishing positions. The revenues from these events are recognized upon completion of the contracted services. In the event that the Company’s revenues are for services provided under contracts greater than one month in length, the contracts will be billed in total at the onset of the contact period, and to the extent that billings exceed revenue earned, the Company will record such amount as deferred revenue until the revenue is earned. We recognize revenue on these contracts in the period the services are provided under the contract. Expenses associated with providing the services are recognized in the period the services are provided which coincides with when the revenue is earned.

 

Net loss per share

 

The Company utilizes FASB ASC 260, “Earnings per Share.” Basic earnings per share is computed by dividing earnings (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include additional common share equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common share equivalents if their effect would be anti-dilutive. For the three months ended March 31, 2020 and 2019 there were no potentially dilutive shares.

 

Products and services, geographic areas and major customers

 

The Company earns revenue from race purses, race event consulting and the occasional sale of racecars, but does not separate sales from different activities into operating segments.

 

 

 

 6 

 

 

Concentrations of debt financing

 

The Company has line of credit agreements with companies owned and operated by the Company’s CEO and majority shareholder. Outstanding principal on these lines of credit account for 7.29% and 20.18% of the Company line of credit balances at March 31, 2020 and December 31, 2019, respectively. See Note 7 for further discussion of line of credit terms and relationships.

 

Concentration of revenue sources

 

The Company has a concentration of revenue sources with companies owned and operated by the Company’s CEO. See Note 9 for further discussion of these sources.

 

Stock based compensation

 

The Company accounts for employee and non-employee stock awards under FASB ASC 718, “Compensation – Stock Compensation”, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. 

 

Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if adopted, will have a material effect on our condensed financial statements.

 

NOTE 3. GOING CONCERN

 

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company's ability to continue as a going concern is contingent upon its ability to achieve and maintain profitable operations, and the Company’s ability to raise additional capital as required.

 

The loss from operations was $32,389 and the accumulated deficit was $3,372,810 as of and for the three months ended March 31, 2020. 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. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

NOTE 4. FIXED ASSETS

 

Fixed asset values recorded at cost are as follows:

 

   March 31,
2020
   December 31,
2019
 
         
Simulation Rig  $11,013   $11,013 
Less: Accumulated depreciation   (4,407)   (3,856)
           
Fixed assets, net  $6,606   $7,157 

 

Depreciation expense was $551 and $3,051 for the three months ended March 31, 2020 and 2019, respectively.

 

 

 

 7 

 

 

NOTE 5. NOTE RECEIVABLE – RELATED PARTY

 

On June 1, 2019, the Company sold two racecars to a related party for a $50,000 note receivable, resulting in a gain of $20,000. The interest rate on the note is 1% per annum and payments of $1,000 per month began August 2019 and increase to $4,778 per month in March 2020, with a final payment of $525 in December 2020. The balance of the note was $42,360 as of March 31, 2020 and December 31, 2019, respectively.

 

NOTE 6. LEASE RECEIVABLE – RELATED PARTY

 

On January 28, 2020, the Company purchased an Audi Sportscar from a related party for $300,000. On February 15, 2020, the Company leased the vehicle back to the same related party. The term of the lease is for 24 months with payments of $14,125 per month, with a purchase option at the end of the lease of $1,000. At the end of the lease, 200,000 shares of stock of the Company owned by the related party will be cancelled at a value of $.15 per share. In addition, the related party has the right to purchase the car for $1,000. The lease is classified as a direct financing lease under ASC 842. The present value of the lease payments, excluding the end of lease provisions, discounted at an interest rate of 12%, is $300,063 with an estimated residual value of approximately $24,000. The Company is using the actual cost of the vehicle as the initial value of the lease in accordance with ASC 842-30-55-17A. For the three months ended March 31, 2020, the company recorded $4,852 of interest income related to this lease.

 

The undiscounted cash flow principal payments for the remaining term of the lease will be as follows:

 

2020  $141,250 
2021   169,500 
2022   14,125 
Total lease payments receivable   324,875 
Less deferred interest   (37,652)
Net investment in direct financing leases   287,223 
Less current portion   (153,826)
Long-term lease receivable  $133,397 

 

NOTE 7. LINES OF CREDIT

 

On October 15, 2012, the Company entered into a revolving line of credit agreement with TVP Investments, LLC, a Georgia Limited Liability Company in the amount up to $500,000. The line of credit is unsecured, bears interest of 10% and has a maturity date of December 31, 2019. As of March 31, 2020, and December 31, 2019, the balance of the line of credit was $75,000 for both periods. As of March 31, 2020, and December 31, 2019, the Company had accrued interest on this line of credit in the amounts of $46,793 and $44,918, respectively.

 

The Company also has a business line of credit up to $3,000 with Well Fargo bank. The line of credit is unsecured with a variable interest rate of approximately 18.0%. No amounts have been drawn on this line of credit.

  

 

 

 8 

 

 

NOTE 8. STOCKHOLDERS’ EQUITY

 

There are 10,000,000 shares of preferred stock authorized with a $.001 par value, of which no shares are issued and outstanding.

 

There are 190,000,000 shares of common stock authorized with a par value of $0.001 per share, of which 13,929,581 shares are issued and outstanding.

 

In January 2017, the Company entered into a 36-month warehouse lease with Rick Ware Leasing, LLC, payable in 1,200,000 shares of the Company’s common stock (400,000 shares annually). As of December 31, 2019 and March 31, 2020, the remaining 800,000 shares valued at $120,000 have not been issued and are reported within stockholders deficit on the balance sheet. The lease agreement expired December 31, 2019 and was not renewed. See Note 9 for equity transactions with related parties.

 

There were no issuances of preferred or common stock during the three months ended March 31, 2020.

 

NOTE 9. RELATED PARTY TRANSACTIONS

 

Consulting expense to related parties

 

 

On December 31, 2018, the Company extended for three years a previous consulting agreement with General Pacific Partners, LLC a company owned and operated by the CEO and majority shareholder to provide consulting services in the motor sports marketing industry. The consulting agreement requires a $5,000 monthly fee and can be terminated by either party pursuant to a 60 day notice. During the three months ended March 31, 2020 and 2019, the Company incurred related party consulting expense of $15,000, respectively for both periods. As of March 31, 2020, and December 31, 2019, the Company had an accrued payable balance due to this related party of $165,000 and $150,000, respectively.

  

Lines of credit – related parties

 

On October 1, 2009, the Company entered into a line of credit agreement for up to $600,000 with a related party General Pacific Partners, LLC owned and operated by the CEO and majority shareholder of the Company that also provides motor sports marketing industry consulting services to the Company as needed. Under the agreement, the Company receives operating fund advances and reimbursement for expenses incurred on behalf of the Company. The outstanding indebtedness under the Line of Credit bears interest at eight percent (8%) per annum. As of March 31, 2020, and December 31, 2019, the Company owed $5,297 and $18,964, respectively, to this related party. As of March 31, 2020, and December 31, 2019, the Company had accrued interest on this line of credit in the amounts of $38,406 and $35,929, respectively.

   

On August 5, 2013, the Company entered into a line of credit agreement for up to $600,000 with a related party FinTekk AP, LLC owned and operated by the CEO and majority shareholder. Under the agreement, the Company receives operating fund advances and reimbursement for expenses incurred on behalf of the Company. As of March 31, 2020, and December 31, 2019, the Company owed $600 respectively, to this related party. As of March 31, 2020, and December 31, 2019, the Company had accrued interest on this line of credit in the amounts of $83,555 and $83,543, respectively.

 

Note payable – related party

 

On March 6, 2020, the Company borrowed $287,500 from a related party. The term of the note is 36 months with payments of $14,055 per month commencing April 6, 2020 including interest at 12%. Payments will continue until the note is paid in full. The Company had accrued interest at March 31, 2020 is $2,318 and a balance of $287,500.

 

NOTE 10. SUBSEQUENT EVENTS

 

Management has concluded that the COVID-19 outbreak in 2020 may have a significant impact on business in general, but the potential impact on the Company is not currently measurable. 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. Management has not been able to measure the potential financial impact on the Company but will review commercial and federal financing options should the need arise.

 

 

 

 9 

 

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD-LOOKING STATEMENT NOTICE

 

This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control.  These factors include but are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.

 

Overview

 

This section contains forward-looking statements that involve risks and uncertainties. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

The following discussion should be read in conjunction with the condensed financial statements and notes thereto included herein.

 

We are a small auto competition and event management business that has participated primarily in NASCAR and IMSA sanctioned events. We utilize our racecars to provide marketing and branding services to client advertisers desiring to use our racecars to market their product or service by having our vehicles carry their corporate brand. We have conducted limited operations to date.

  

Election under JOBS Act of 2012

 

The Company has chosen to opt-in and make use of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act of 2012. This election is irrevocable. If we choose to adopt any accounting standard on the public company time frame we would be required to adopt all subsequent accounting standards on the public company time frame.

 

Jumpstart Our Business Startups Act

 

In April, 2012, the Jumpstart Our Business Startups Act ("JOBS Act") was enacted into law. The JOBS Act provides, among other things:

 

Exemptions for emerging growth companies from certain financial disclosure and governance requirements for up to five years and provides a new form of financing to small companies;

 

Amendments to certain provisions of the federal securities laws to simplify the sale of securities and increase the threshold number of record holders required to trigger the reporting requirements of the Securities Exchange Act of 1934;

 

Relaxation of the general solicitation and general advertising prohibition for Rule 506 offerings;

 

Adoption of a new exemption for public offerings of securities in amounts not exceeding $50 million; and Exemption from registration by a non-reporting company of offers and sales of securities of up to $1,000,000 that comply with rules to be adopted by the SEC pursuant to Section 4(6) of the Securities Act and exemption of such sales from state law registration, documentation or offering requirements.

 

 

 

 

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In general, under the JOBS Act a company is an emerging growth company if its initial public offering ("IPO") of common equity securities was affected after December 8, 2011 and the company had less than $1 billion of total annual gross revenues during its last completed fiscal year. A company will no longer qualify as an emerging growth company after the earliest of

  

(i) The completion of the fiscal year in which the company has total annual gross revenues of $1 billion or more;

 

(ii) The completion of the fiscal year of the fifth anniversary of the company's IPO;

 

(iii) The company's issuance of more than $1 billion in nonconvertible debt in the prior three-year period; or

 

(iv) The company becoming a "larger accelerated filer" as defined under the Securities Exchange Act of 1934.

 

The JOBS Act provides additional new guidelines and exemptions for non-reporting companies and for non-public offerings. Those exemptions that impact the Company are discussed below.

 

Financial Disclosure. The financial disclosure in a registration statement filed by an emerging growth company pursuant to the Securities Act of 1933 will differ from registration statements filed by other companies as follows:

 

(i) Audited financial statements required for only two fiscal years;

 

(ii) Selected financial data required for only the fiscal years that were audited;

 

(iii) Executive compensation only needs to be presented in the limited format now required for smaller reporting companies. (A smaller reporting company is one with a public float of less than $75 million as of the last day of its most recently completed second fiscal quarter)

 

However, the requirements for financial disclosure provided by Regulation S-K promulgated by the Rules and Regulations of the SEC already provide certain of these exemptions for smaller reporting companies. The Company is a smaller reporting company. Currently a smaller reporting company is not required to file as part of its registration statement selected financial data and only needs audited financial statements for its two most current fiscal years and no tabular disclosure of contractual obligations.

  

The JOBS Act also exempts the Company's independent registered public accounting firm from complying with any rules adopted by the Public Company Accounting Oversight Board ("PCAOB") after the date of the JOBS Act's enactment, except as otherwise required by SEC rule.

 

The JOBS Act also exempts an emerging growth company from any requirement adopted by the PCAOB for mandatory rotation of the Company's accounting firm or for a supplemental auditor report about the audit.

 

Internal Control Attestation. The JOBS Act also provides an exemption from the requirement of the Company's independent registered public accounting firm to file a report on the Company's internal control over financial reporting, although management of the Company is still required to file its report on the adequacy of the Company's internal control over financial reporting.

 

 

 

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Section 102(a) of the JOBS Act exempts emerging growth companies from the requirements in §14A(e) of the Securities Exchange Act of 1934 for companies with a class of securities registered under the 1934 Act to hold shareholder votes for executive compensation and golden parachutes.

 

Other Items of the JOBS Act. The JOBS Act also provides that an emerging growth company can communicate with potential investors that are qualified institutional buyers or institutions that are accredited to determine interest in a contemplated offering either prior to or after the date of filing the respective registration statement. The Act also permits research reports by a broker or dealer about an emerging growth company regardless if such report provides sufficient information for an investment decision. In addition, the JOBS Act precludes the SEC and FINRA from adopting certain restrictive rules or regulations regarding brokers, dealers and potential investors, communications with management and distribution of a research reports on the emerging growth company IPO. 

 

 Section 106 of the JOBS Act permits emerging growth companies to submit 1933 Act registration statements on a confidential basis provided that the registration statement and all amendments are publicly filed at least 21 days before the issuer conducts any road show. This is intended to allow the emerging growth company to explore the IPO option without disclosing to the market the fact that it is seeking to go public or disclosing the information contained in its registration statement until the company is ready to conduct a roadshow.

 

Election to Opt Out of Transition Period. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a 1933 Act registration statement declared effective or do not have a class of securities registered under the 1934 Act) are required to comply with the new or revised financial accounting standard.

 

The JOBS Act provides a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of the transition period and will “opt-in” and make use of the transitional period.

 

Off-balance sheet arrangements

 

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

 

Significant Accounting Policies

 

Our condensed financial statements have been prepared in accordance with U.S. GAAP in the United States of America. The preparation of these condensed 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 Condensed Financial Statements describes the significant accounting policies used in the preparation of the condensed 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 condensed 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.

 

 

 

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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 condensed 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 condensed financial statements are fairly stated in accordance with U.S. GAAP 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 condensed financial statements:

  

 Use of Estimates – These condensed financial statements have been prepared in accordance with U.S. GAAP and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, our management has estimated the expected economic life and value of our licensed technology, our net operating loss for tax purposes and our stock, option and warrant expenses related to compensation to employees and directors, consultants and investment banks. Actual results could differ from those estimates.

  

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.

 

Revenue Recognition – The Company adopted ASU 2014-09, “Revenue from Contracts with Customers” on January 1, 2018, using the modified retrospective method, which did not have a material impact on the timing and amount of product revenues.

 

The new revenue recognition standard prescribes a five-step model that focuses on transfer of control and entitlement to payment when determining the amount of revenue to be recognized. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

 

The majority of revenues are from consulting services provided at events which range from one day to one week in length. The revenues from these events are recognized upon completion of the contracted services. In the event that the Company’s revenues are for services provided under contracts greater than one month in length, the contracts will be billed in total at the onset of the contact period, and to the extent that billings exceed revenue earned, the Company will record such amount as deferred revenue until the revenue is earned. We recognize revenue on these contracts in the period the services are provided under the contract. Expenses associated with providing the services are recognized in the period the services are provided which coincides with when the revenue is earned.

 

Our revenues, to date, has been derived from consulting fees. Revenue is recognized on an accrual basis as earned under contract terms.

 

Property and equipment – Property and equipment are recorded at cost and depreciated under the straight line method over each item's estimated useful life. The Company uses a 5 year life for racecars and equipment, 7 years for furniture and fixtures.

 

Intangible and Long-Lived Assets – We follow FASB ASC 360-10-35 which has 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. During the period ended March 31, 2019 no impairment losses were recognized.

 

 

 

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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.

  

Plan of Operations

 

RC-1, Inc. (the “Company”), was incorporated in the State of Nevada on May 14, 2009. The Company is a motorsports marketing business focused primary in road racing events in North America utilizing NASCAR type competition equipment. The Company is currently considered to be in the development stage, and has generated only limited revenues from its activities in the racing business.

 

We will continue to focus in “Road Racing” motorsports events organized by several motorsports sanctioning bodies such as The National Association for Stock Car Auto Racing ("NASCAR"), and The International Motorsports Association ("IMSA") and the Sports Car Vintage Racing Association (SVRA).

 

In addition, we intend to continue to compete in the Toyota Southwest Superlate Model Series, SVRA and the GAAS series in an effort to promote our business and brand in the western United States.

 

On February 15, 2019 the Company entered into a Marketing and Branding Consultant Agreement (the “Branding Agreement”) with Carolina Pro-Am Drivers, LLC, (“CPAD”) a company owned and controlled by Richard Ware. Mr. Ware is also the owner and controlling party of Rick Ware Racing, LLC, which is the holder of 8.9% of the Company’s outstanding common shares. Pursuant to the Branding Agreement, CPAD will pay the Company $2,778 per week for the 39 weeks commencing February 21 and ending November 21, for each of the years 2019, 2020 and 2021. The payment periods coincide with the NASCAR Monster Energy NASCAR Cup series yearly schedules.

 

Going Concern

 

As of March 31, 2020, RC-1, Inc. had an accumulated deficit of $3,372,810, and a working capital deficiency of $368,149. These factors raise substantial doubt about our ability to continue as a going concern.

 

Management expects to raise $300,000 in capital through the issuance of debt and equity 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 condensed financial statements do not contain any adjustments which may be required as a result of this uncertainty.

 

Expected management estimates for the cost of operating the business through March 31, 2020 will require additional capital of up to Three Hundred Thousand dollars ($300,000) consisting of: $20,000 for registration and licenses required for entry in sanctioned racing events; $20,000 for travel and lodging; $20,000 for marketing and branding; $30,000 for legal and accounting; $15,000 for engineers and consultants; $15,000 for parts, $90,000 for engine and transmission leases. $50,000 for fuels and tires; $10,000 for racecar transporter travel; $20,000 for debt service of all Company notes payable; and $10,000 in airfare and rental cars.

 

The Company has no outstanding payments due for the lease of race cars at this time.

 

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 General Pacific Partners, LLC and TVP Investments, LLC, Inc. There can be no assurance that we will be able to raise any additional equity or debt capital.

 

 

 

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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 issuances of common stock. At March 31, 2020, the company had cash of $49,590.

 

Result of Operations

 

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019 

 

Revenues

 

The Company recognized $13,888 in related party consulting revenue during the three months ended March 31, 2020 and $24,668 in consulting revenue for the same period in 2019. The Company did not recognize any racing event related revenue due to the fact that most of the racing events scheduled occur after June of each year.

   

Operating Expenses

 

For the three months ended March 31, 2020 operating expenses were $44,446 compared to $50,176 in 2019 for a decrease of $5,730. The decrease is due to a decrease in general and administrative fees to $5,747 from $18,051 for a difference of $12,304.

 

Interest and Financing Costs

 

Interest expense was $6,683 for the three months ended March 31, 2020 compared to $2,222 in the three months ended March 31, 2019. The increase in the interest expense was related directly to an increase in the overall debt of the company.

 

Net Loss

 

The Company incurred losses of $32,389 in the three months ended March 31, 2020 compared to $27,730 during the three months ended March 31, 2019, due to the factors discussed above. The increase in the net loss for the period was due to a decrease in revenues for the period ended March 31, 2020.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company had $49,590 in cash at March 31, 2020 with a working capital deficit of $368,149. As of December 31, 2019, the Company had cash of $50,106 with a working capital deficit of $348,624.

 

Cash Flows for the three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019.

 

Operating activities

 

During the three months ended March 31, 2020, there was cash provided of $17,411 from operating activities compared to $18,618 provided during the three months ended March 31, 2019, a decrease of $1,207 was due to a reduction in accounts payable to related parties for the period.

 

 

 

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Investing activities

 

We used $292,360 of cash flow in investing activities during the three months ended March 31, 2020 compared to no cash flow during the same period in 2019. The cash paid was used to finance the purchase of the asset subsequently leased to a related party.

 

Financing activities

 

During the three months ended March 31, 2020, $274,433 was provided from financing activities compared to $18,862 used in financing activities during the three months ended March 31, 2019, an increase of $293,295. The increase is due to the financing of an asset purchased in the first quarter of 2020.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.

 

As a “smaller reporting company,” we are not required to provide the information under this Item 3.

 

ITEM 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures

 

Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our Chief Executive Officer as of the end of the period covered by this report, our Chief Executive Officer concluded that our disclosure controls and procedures have not been effective as a result of a weakness in the design of internal control over financial reporting identified below.

  

As used herein, “disclosure controls and procedures” mean controls and other procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the condensed financial statements for external purposes in accordance with U.S. GAAP.

 

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 condensed financial statements in accordance with U.S. GAAP, 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 condensed financial statements.

 

This quarterly 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 three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

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PART II – OTHER INFORMATION

 

ITEM 1. Legal Proceedings

 

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or material pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the three months ended March 31, 2020, there were no sale of shares of the Company's common stock.

 

ITEM 3. Default Upon Senior Securities

 

During the three months ended March 31, 2020, the Company had no senior securities issued and outstanding.

 

ITEM 4. Mine Safety Disclosures

 

Not applicable to our Company.

 

ITEM 5. Other Information

 

None.

 

ITEM 6. Exhibits

 

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K

 

SEC Ref. No.   Title of Document
31.1*   Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*   Certification of the Principal Executive Officer pursuant to U.S.C. pursuant to Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*   Certification of the Principal Financial Officer pursuant to U.S.C. pursuant to Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*   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

 

*   Filed herewith.

 

 

 

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SIGNATURES

  

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

RC-1, Inc.

 

May 15, 2020

 

By: /s/ Kevin O'Connell

Kevin O'Connell

Chief Executive Officer 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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