10-Q 1 tropmarq.txt =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM 10-Q ------------------------------------ |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2009 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ ------------------ Commission file number 000-52171 TROPICAL PC, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) ------------------ Nevada 20-5220693 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3118 W. Parkwood Ave., #111, Webster, TX 77598 --------------------------------------------------- (Address of principal executive offices)(Zip Code) Issuer's telephone number, including area code: (281) 554-9560 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check one). Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_| Smaller Reporting Company |X| (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_| As of May 14, 2009, the registrant's outstanding common stock consisted of 25,210,000 shares, $0.001 Par Value. Authorized - 75,000,000 common voting shares. Table of Contents Tropical PC, Inc. Index to Form 10-Q For the Quarterly Period Ended March 31, 2009

2 Part I. Financial Information Item 1. Financial Statements TROPICAL PC, INC. AND SUBSIDIARY (a development stage company) Consolidated Balance Sheets

The accompanying notes are an integral part of these statements 3 TROPICAL PC, INC. AND SUBSIDIARY (a development stage company) Consolidated Statements of Operations (Unaudited)

The accompanying notes are an integral part of these statements 4 TROPICAL PC, INC. AND SUBSIDIARY (a development stage company) Consolidated Statements of Cash Flows (Unaudited)

The accompanying notes are an integral part of these statements 5 TROPICAL PC, INC. AND SUBSIDIARY (a development stage company) Notes Note 1 - Basis of Presentation The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these consolidated interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2008 and notes thereto included in the Company's 10-K annual report. The Company follows the same accounting policies in the preparation of interim reports. Results of operations for the interim periods are not indicative of annual results. Note 2 - Going concern These consolidated 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. As at March 31, 2009, the Company has recognized $55,127 in revenues and has accumulated operating losses of approximately $(50,410) since inception. The Company's ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. Management plans to raise equity capital to finance the operating and capital requirements of the Company. Amounts raised will be used to further development of the Company's products, to provide financing for marketing and promotion, to secure additional property and equipment, and for other working capital purposes. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might arise from this uncertainty. 6 TROPICAL PC, INC. AND SUBSIDIARY (a development stage company) Notes Note 3 - Related party transactions Office services are provided without charge by a director. Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein. The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts. During the three months ending March 31, 2009, an officer loaned the Company $28,825, with no stated interest, or fixed term of repayment. The total loans payable to this officer are $28,825 at March 31, 2009. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Information The Company may from time to time make written or oral "forward-looking statements" including statements contained in this report and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements of the Company's plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, in addition to others not listed, could cause the Company's actual results to differ materially from those expressed in forward looking statements: the strength of the domestic and local economies in which the Company conducts operations, the impact of current uncertainties in global economic conditions and the ongoing financial crisis affecting the domestic and foreign banking system and financial markets, including the impact on the Company's suppliers and customers, changes in client needs and consumer spending habits, the impact of competition and technological change on the Company, the Company's ability to manage its growth effectively, including its ability to successfully integrate any business which it might acquire, and currency fluctuations. All forward- looking statements in this report are based upon information available to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Critical Accounting Policies ---------------------------- There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our Annual Report for the fiscal year ended December 31, 2007. 8 Results of Operations --------------------- Overview of Current Operations ------------------------------ Tropical PC, Inc. ("Tropical" or "the Company") was incorporated under the laws of the State of Nevada on September 22, 2004, under the name Tropical PC, Inc. On October 31, 2006, Tropical PC, Inc., a Nevada corporation and DEZ, Inc., ("DEZ") a Nevada corporation entered into an Acquisition Agreement and Plan of Merger (the "Merger Agreement") whereby Tropical acquired all the outstanding shares of common stock of DEZ from its sole stockholder in an exchange for $5,000 cash in a transaction where Tropical is the successor corporation. The Merger was approved by the unanimous consent of the Board of Directors of Tropical on October 30, 2006. On December 8, 2008, Grand Horizons Excursions, a Nevada corporation and subsidiary of Tropical PC, Inc. entered into a related party Capital Lease Agreement, whereby Grand Horizons Excursions acquired a yacht from Mr. David D. Selmon in exchange for 25,000,000 restricted shares of the Registrant's common stock. The Board of Director approved the Capital Lease arrangement on October 1, 2008; however, the lease agreement was not finalized until December 8, 2008. Our Business ------------ From inception through October, 2008, Tropical PC provided pest control management for residential and commercial properties. Pest control workers treat residential and commercial properties with chemicals and mechanical traps to get rid of rodents, insects, and other common pests. They make periodic visits to their clients' properties to make sure they remain pest-free. They may also control diseases and pests that attack lawns, shrubs, and other outdoor vegetation. The Company's prospective customers and marketing targets included new and pre-owned homebuyers. With the acquisition of the yacht by our subsidiary, our business focus has shifted, and we are now a provider of yacht services in the Gulf of Mexico. 9 Yachting offers a broad range of services to suit vacationing customers of many ages, backgrounds and interests. We offer contemporary, and premium yachting experiences. The contemporary experience typically includes cruises that last one days or less, have a more casual ambiance and are less expensive than premium cruises. The premium experience typically includes cruises that last from two to seven days. Premium cruises emphasize quality, comfort, style and more destination-focused itineraries and the average pricing on these cruises is typically higher than contemporary cruises. There generally is significant overlap and competition among all yachting providers. Marketing Strategy ------------------ We are a customer service-driven company. We believe that we have established satisfactory support systems for our clients to book a cruise on our yacht. Currently, we sell our services mainly through word of month. We are looking at expanding the marketing of our services through a wide variety of marketing techniques, including websites, seminars and videos, to familiarize prospective customers with our yachting services. Our investment in customer service has been focused on the development of systems and specific cruise destinations on the Gulf of Mexico. We have improved our systems by developing greater contact and interactivity with our customer base. We plan to pursue comprehensive marketing campaigns to market our yachting services to vacationers, and business people. To stimulate demand, we also plan to offer more home port locations, which enable certain guests to lower the price of their cruise vacation by substantially reducing or eliminating the cost of air travel to and from the port. Seasonality ----------- Our revenues from the sale of yachting services are seasonal. Historically, demand for yachting has been greatest during the second and third fiscal quarters, which includes the summer months. This higher demand will results in higher revenues during the better weather seasons. The seasonality of our results is also increased due to our yacht being taken out of service for maintenance, which we typically schedule during non-peak demand periods. 10 Competition ----------- We compete with land-based vacation alternatives throughout Texas, including, among others, hotels, resorts, theme parks, vacation ownership properties located near the Gulf of Mexico and numerous other vacation choices on the Gulf of Mexico. There are many other yachts based in the Gulf of Mexico which competes for our customers. Most of our competitors are significantly larger than we are, have been in business much longer than we have, and have significantly more resources at their disposal. Tropical PC, Inc.'s Funding Requirements ---------------------------------------- Future funding could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company's business, results of operations and financial condition. Any future acquisitions of other businesses, technologies, services or product(s) might require the Company to obtain additional equity or debt financing, which might not be available on terms favorable to the Company, or at all, and such financing, if available, might be dilutive. Results of Operations for the quarter ended March 31, 2009 ---------------------------------------------------------- During the three months ended March 31, 2009, the Company had a net loss of $(23,752) or $(0.01) per share versus a net loss of $(5,887) or $(0.01) per share for the same period last year. For the three months ending March 31, 2009, the Company experienced general and administrative expenses of $5,651, primarily accounting and legal fees, $19,219 in repairs and maintenance, and $5,938 in depreciation. Since the Company's inception, on September 22, 2004, the Company experienced a net lost $(50,410). Revenues -------- During the three month period ended March 31, 2009, the Company generated $7,057 in revenues and compared to no revenues for the same period last year. Since inception on September 22, 2004, the Company has generated $55,127 in revenues. 11 Plan of Operation ----------------- Management does not believe that the Company will be able to generate any significant profit during the coming year. Management believes the Company can sustain itself for the next twelve months. Management has agreed to keep the Company funded at its own expense, without seeking reimbursement for expenses paid. The Company's need for capital may change dramatically if it can generate additional revenues from its operations. In the event the Company requires additional funds, the Company will have to seek loans or equity placements to cover such cash needs. There are no assurances additional capital will be available to the Company on acceptable terms. Going Concern ------------- Going Concern - The Company experienced operating losses, of $(22,712) since its inception on September 22, 2004 through the period ended March 31, 2009. The financial statements have been prepared assuming the Company will continue to operate as a going concern which contemplates the realization of assets and the settlement of liabilities in the normal course of business. No adjustment has been made to the recorded amount of assets or the recorded amount or classification of liabilities which would be required if the Company were unable to continue its operations. (See Financial Footnote 2) Summary of any product research and development that we will perform for the term of our plan of operation ---------------------------------------------------------------------------- We do not anticipate performing any additional significant product research and development under our current plan of operation. Expected purchase or sale of plant and significant equipment ------------------------------------------------------------ We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time. Significant changes in the number of employees ---------------------------------------------- As of March 31, 2009, we did not have any employees. We are dependent upon our sole officer and director for our future business development. As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time. 12 Liquidity and Capital Resources ------------------------------- The Company has limited financial resources available, which has had an adverse impact on the Company's liquidity, activities and operations. These limitations have adversely affected the Company's ability to obtain certain projects and pursue additional business. The balance sheet as of March 31, 2009 reflects cash of $13,929, an additional $18,600 cash held in an escrow account, current assets of $39,280 and current Liabilities of $106,063. Cash and cash equivalents from inception to date have been sufficient to provide the operating capital necessary to operate to date. Management believes it has sufficient funds to remain operational for the next twelve months. In order for the Company to remain a Going Concern it will need to find additional capital. Additional working capital may be sought through additional debt or equity private placements, additional notes payable to banks or related parties (officers, directors or stockholders), or from other available funding sources at market rates of interest, or a combination of these. The ability to raise necessary financing will depend on many factors, including the nature and prospects of any business to be acquired and the economic and market conditions prevailing at the time financing is sought. No assurances can be given that any necessary financing can be obtained on terms favorable to the Company, or at all. As a result of our the Company's current limited available cash, no officer or director received compensation through the three months ended March 31, 2009. No officer or director received stock options or other non-cash compensation since the Company's inception through March 31, 2009. The Company has no employment agreements in place with its officers. Nor does the Company owe its officers any accrued compensation, as the Officers agreed to work for company at no cost, until the company can become profitable on a consistent Quarter-to-Quarter basis. Off-Balance Sheet Arrangements ------------------------------ We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors. 13 Critical Accounting Policies and Estimates ------------------------------------------ Revenue Recognition: We recognize revenue from product sales once all of the following criteria for revenue recognition have been met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonable assured. New Accounting Standards ------------------------ In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements". This statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the de-consolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is equity in the consolidated financial statements. SFAS No. 160 is effective for fiscal years and interim periods beginning after December 15, 2008. The adoption of SFAS 160 is not expected to have a material impact on the Company's financial position, results of operation or cash flows. As of January 1, 2008 we adopted SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159 allows the company to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The adoption of SFAS 159 has not had a material impact on our financial position, results of operation or cash flows. As of January 1, 2008 we adopted SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value and provides guidance for measuring and disclosing fair value. The adoption of SFAS 157 has not had a material impact on our financial position, results of operation or cash flows. Item 3. Quantitative and Qualitative Disclosures about Market Risk. Not applicable. 14 Item 4T. Controls and Procedures Evaluation of disclosure controls and procedures ------------------------------------------------ Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of those internal controls. As defined by the SEC, internal control over financial reporting is a process designed by our principal executive officer/principal financial officer, who is also the sole member of our Board of Directors, to provide reasonable assurance regarding the reliability of financial reporting and the reparation of the financial statements in accordance with U. S. generally accepted accounting principles. As of the end of the period covered by this report, we initially carried out an evaluation, under the supervision and with the participation of our President (who is also our principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our President and chief financial officer initially concluded that our disclosure controls and procedures were not effective. Management's Report On Internal Control Over Financial Reporting ---------------------------------------------------------------- Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's principal executive and principal financial officer and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: - Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; - 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 - 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. 15 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. As of December 31, 2008 management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and the aforementioned material weakness was identified by our President in connection with the review of our financial statements as of December 31, 2008. Management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods. This quarterly report does not include an attestation report of the Corporation's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Corporation's registered public accounting firm pursuant to temporary rules of the SEC that permit the Corporation to provide only the management's report in this quarterly report. 16 Management's Remediation Initiatives ------------------------------------ In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures: We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us. Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board. We anticipate that these initiatives will be at least partially, if not fully, implemented by December 31, 2009. Additionally, we plan to test our updated controls and remediate our deficiencies by December 31, 2009. Changes in internal controls over financial reporting ----------------------------------------------------- There was no change in our internal controls over financial reporting that occurred during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. 17 PART II. OTHER INFORMATION Item 1 -- Legal Proceedings From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us. Item 1A - Risk Factors See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10K for the fiscal year ended December 31, 2007 and the discussion in Item 1, above, under "Liquidity and Capital Resources." Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds On December 8, 2008, Grand Horizons Excursions, a Nevada corporation and subsidiary of Tropical PC, Inc. entered into a related party Capital Lease Agreement, whereby Grand Horizons Excursions acquired a yacht from Mr. David D. Selmon in exchange for 25,000,000 restricted shares of the Registrant's common stock. Item 3 -- Defaults Upon Senior Securities None. Item 4 -- Submission of Matters to a Vote of Security Holders None. Item 5 -- Other Information None. 18 Item 6 -- Exhibits Incorporated by reference ------------------------- Filed Period Filing Exhibit Exhibit Description herewith Form ending Exhibit date ------------------------------------------------------------------------------- 3.1 Articles of Incorporation, 10-Q 3.1 11/21/2008 as currently in effect ------------------------------------------------------------------------------- 3.2 Bylaws 10-Q 3.1 11/21/2008 as currently in effect ------------------------------------------------------------------------------- 3.3 Articles of Merger, by 8-K 3.3 12/22/2006 and between Tropical PC, Inc. and DEZ, Inc. dated December 11, 2006. ------------------------------------------------------------------------------- 10.1 Capital Lease Agreement dated 8-K 10.1 12/09/2008 December 8, 2008 ------------------------------------------------------------------------------- 23.1 Consent Letter from Moore X and Associates Chartered ------------------------------------------------------------------------------- 31.1 Certification of President X and Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act ------------------------------------------------------------------------------- 32.1 Certification of President X and Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act ------------------------------------------------------------------------------- 19 SIGNATURES Pursuant to 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 hereunto duly authorized. Tropical PC, Inc. ------------------------ Registrant By: /s/ David D. Selmon ------------------------------ Name: David D. Selmon Title: Chief Executive Officer and Director Dated: May 14, 2009 ------------ 20

Tropical PC, Inc. 10-Q