Cannabis Sativa, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - Cannabis Sativa, Inc.	ex311.htm
EX-31.2 - EXHIBIT 31.2 - Cannabis Sativa, Inc.	ex312.htm
EX-32 - EXHIBIT 32 - Cannabis Sativa, Inc.	ex32.htm

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 September 30, 2010

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

For the transition period from __________ to __________

Commission File Number 000-53571

Ultra Sun Corp.

(Exact name of registrant as specified in its charter)

Nevada (State or other jurisdiction of incorporation or organization)	20-1898270 (IRS Employer Identification No.)
1532 East St. Marks Court, Salt Lake City, Utah (Address of principal executive offices)	84124 (Zip Code)

(801) 573-6982

(Registrant’s telephone number, including area code)

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 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). The registrant is not yet part of the Interactive Data reporting system.

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer ¨ Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

1,300,000 shares of $0.001 par value common stock on November 5, 2010

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Ultra Sun Corp.

FINANCIAL STATEMENTS

(UNAUDITED)

September 30, 2010

The financial statements included herein 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. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made. These financial statements should be read in conjunction with the accompanying notes, and with the historical financial information of the Company.

Ultra Sun Corp.
Balance Sheets

	September 30,			December 31,
	2010			2009
	(Unaudited)
ASSETS
Current assets:
Cash	$	6,046		$	12,718
Inventory		2,132			2,199
Total current assets		8,178			14,917
Fixed assets:
Furniture and equipment		10,619			10,619
Tanning beds		158,446			158,446
Leasehold improvements		37,250			37,250
Total fixed assets		206,315			206,315
Less accumulated depreciation		(181,584	)		(163,719	)
Net fixed assets		24,731			42,596
Other assets
Deposits		2,728			2,728
Total assets	$	35,637		$	60,241

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	8,310		$	9,078
Deferred revenue		1,574			1,574
Note payable - related party - current portion (note 4)		32,000			32,000
Accrued interest - notes payable		5,272			2,562
Total current liabilities		47,156			45,214
Long-term liabilities
Deferred revenue - long term portion		3,017			4,197
Total long-term liabilities		3,017			4,197
Total liabilities		50,173			49,411

Stockholders' equity (deficit) (note 3)
Preferred stock; $.001 par value, 5,000,000 authorized
shares, no shares issued and outstanding		-			-
Common stock; $.001 par value, 45,000,000 authorized
shares, 1,300,000 and 1,300,000 shares issued
and outstanding, respectively		1,300			1,300
Additional paid-in capital		226,341			226,341
Retained earnings		(242,177	)		(216,811	)
Total stockholders' equity (deficit)		(14,536	)		10,830

Total liabilities and stockholders' equity (deficit)	$	35,637		$	60,241

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

Ultra Sun Corp.
Statements of Operations
(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Revenue
Tanning and product sales	$	28,072		$	31,598		$	144,203		$	153,417
Cost of goods sold		(8,167	)		(8,388	)		(32,065	)		(33,642	)

Gross profit		19,905			23,210			112,138			119,775

Operating Expenses:
Advertising		-			14			23			14
Depreciation and amortization		296			296			889			1,228
General and administrative		8,941			7,960			39,152			30,998
Payroll		12,858			13,974			45,776			52,553
Professional fees		3,643			4,297			18,545			25,315
Rent		10,026			9,716			30,409			29,955

Total operating expenses		35,764			36,257			134,794			140,063

Income (loss) from operations		(15,859	)		(13,047	)		(22,656	)		(20,288	)

Other income (expense)
Interest expense		(980	)		(688	)		(2,710	)		(1,753	)

Total other income (expense)		(980	)		(688	)		(2,710	)		(1,753	)

Net income (loss)	$	(16,839	)	$	(13,735	)	$	(25,366	)	$	(22,041	)

Net income (loss) per share	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)

Weighted average common
shares outstanding		1,300,000			1,300,000			1,300,000			1,300,000

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

Ultra Sun Corp.
Statements of Cash Flows
(Unaudited)



	For the Nine Months Ended
	September 30,
	2010			2009

Operating Activities
Net income (loss)	$	(25,366	)	$	(22,041	)

Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization		17,865			18,204

Changes in operating assets and liabilities:
(Increase) decrease in inventory		67			(578	)
(Increase) decrease in accounts receivable		-			302
(Increase) decrease in prepaid expenses		-			2,000
Increase (decrease) in accounts payable
and accrued expenses		(768	)		(9,729	)
Increase (decrease) in due to officer		-			(212	)
Increase (decrease) in accrued interest		2,710			1,744
Increase (decrease) in deferred revenue		(1,180	)		(1,180	)
Net cash provided by (used in) operating activities		(6,672	)		(11,490	)

Financing Activities
Cash borrowed from related parties		-			12,000
Net cash provided by financing activities		-			12,000

Investing Activities
Acquisition of furniture, fixtures & equipment		-			(885	)
Net cash used in investing activities		-			(885	)

Net increase (decrease) in cash		(6,672	)		(375	)
Cash at beginning of period		12,718			8,068
Cash at end of period	$	6,046		$	7,693

Supplemental disclosures
Interest paid in cash	$	-		$	9

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

ULTRA SUN CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 – CONDENSED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed financial statements include the accounts of Ultra Sun Corp. These statements are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the Company’s most recent annual financial statements for the year ended December 31, 2009. In particular, the Company’s significant accounting policies were presented as Note 1 to the financial statements in that report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed financial statements for the period ended September 30, 2010 are not necessarily indicative of the operating results that may be expected for the full year ending December 31, 2010.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization - The Company was organized under the laws of the State of Nevada on November 5, 2004 and has elected a fiscal year end of December 31. On November 15, 2004 (Date of Acquisition) the Company acquired the net assets, with a deemed fair value of ($5,118) on the date of acquisition, and the existing business and trade name of Sahara Sun (a DBA of Neil Blosch, the sole proprietor), for the purpose of continuing operations in the tanning salon business (the Acquisition). In connection with the Acquisition, the Company also issued $5,000 in stock and $78,000 in notes payable, and acquired a covenant-not-to-compete with a deemed fair value of $88,118, which has been fully amortized. The Acquisition was accounted for using the purchase method of accounting in accordance with Statement of Financial Accounting Standard #141, “Business Combinations”.

Net Earnings Per Share - The computation of net income (loss) per share of common stock is based on the weighted average number of shares outstanding during the periods presented.

Income Taxes – From November 4, 2004, date of inception, through May 31, 2006, the Company operated as a Subchapter S Corporation for tax purposes and cumulative losses of $163,076 were passed through to the Company’s stockholders. Effective June 1, 2006, the Company converted to a “C” corporation. The Company had a federal net operating loss carryforward of $28,851 generated during the year ended December 31, 2009 which begins to expire in 2029. The tax benefit of this net operating loss, based on an effective rate of 35% for federal and 5% for state, was approximately $15,277 and has been offset by a full valuation allowance, after taking into account other deferred tax assets arising from differences in depreciation and amortization.

For the three and nine month periods ended September 30, 2010, the Company recorded net income (loss) before income taxes of ($16,839) and ($25,366), increasing the Company’s net operating loss to $46,217 at September 30, 2010 after taking into account deferred income tax assets of $3,200 resulting from income and expense items being reported for financial accounting and tax reporting purposes in different periods. Deferred income tax assets arising from net operating losses and other temporary differences having been fully offset by valuation allowances, in accordance with ASC Topic 740 “Income Taxes” due to the uncertainty of their realization.

Cash and Cash Equivalents - For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. During the periods ending September 30, 2010 and 2009, the Company did not have non-cash investing activities.

Use of Estimates - The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences may be material to the financial statements.

Inventory - Inventory consists of tanning products such as oils and bronzers and candles purchased for resale and is stated at the lower of cost determined by the first-in first-out (FIFO) method or market. Inventory cost includes those costs directly attributable to the product before sale.

Revenue recognition – The Company recognizes revenue from product or tanning sales at the time the purchase is made or services are rendered. Gift certificates issued are recognized as a liability at the time the gift certificates are sold. Revenue is recognized for these gift certificates when the services are provided.

ULTRA SUN CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements –

In June 2009 the FASB established the Accounting Standards Codification (“Codification” of “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification and, accordingly, the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.

Accounting Standards Update (“ASU”) ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures – Overall, ASU No. 2009-13 (ASU Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASU Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU’s No. 2009-2 through ASU No. 2010-26 contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.

NOTE 3 – COMMON STOCK TRANSACTIONS

On the Date of Acquisition, the Company issued 100,000 common shares to its President in connection with the Acquisition at $0.05 per share for a total value of $5,000.

On November 22, 2004, the Company issued 600,000 common shares to its officers for $0.05 per share for $30,000 in cash.

On February 28, 2006, the Company accepted the surrender and cancellation of 200,000 common shares from its officers.

On June 13, 2006, the Company closed an offering for the sale of 800,000 of its authorized but previously unissued common stock at $0.25 per share. The shares were issued under Nevada securities laws through an offering believed to be exempt from registration under federal law pursuant to section\n 3(b) of the Securities Act of 1933, as amended, Regulation D, Rule 504. The gross proceeds of the offering were $200,000. The officers of the Company acted as sales agents and no commissions were incurred by the Company. A total of $7,359 in expenses directly related to the offering was offset against additional paid-in capital.

No preferred stock has been issued since inception.

NOTE 4 – RELATED PARTY TRANSACTIONS

During 2008, an officer of the Company used his personal credit card to pay certain operating expenses. A total of $212 had been advanced on behalf of the Company at December 31, 2008. The loan was non-interest bearing and was paid back during 2009.

On December 17, 2008 a stockholder advanced funds to the Company to pay operating expenses. The Company executed a promissory note for the principal amount of $10,000. The note called for simple interest at the rate of eight percent per annum. The entire principal together with interest was due on or before March 31, 2009. On March 18, 2009 the stockholder exercised his option to extend the note, including accrued interest, for an additional ninety days, at the simple interest rate of twelve percent per annum. The entire principal together with interest was due and payable on or before June 18, 2009. The due date on this note was subsequently extended to December 31, 2010.

On January 14, 2009 a stockholder advanced funds to the Company to pay operating expenses. The Company executed a promissory note for the principal amount of $10,000. The note called for simple interest at the rate of eight percent per annum. The entire principal together with interest was due on or before April 14, 2009. Any installments on principal and interest not paid when due shall, at the option of the note holder, bear interest thereafter at the rate of twelve percent per annum until paid. On April 27, 2009, the stockholder exercised his option to extend the note, including accrued interest, for an additional ninety days, at the simple interest rate of twelve percent per annum. The entire principal together with accrued interest was due and payable on or before July 14, 2009. The due date on this note was subsequently extended to December 31, 2010.

ULTRA SUN CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 4 – RELATED PARTY TRANSACTIONS (continued)

On January 14, 2009 an officer advanced funds to the Company to pay operating expenses. The Company executed a promissory note for the principal amount of $2,000. The note called for simple interest at the rate of eight percent per annum. The entire principal together with interest was due and payable on or before April 14, 2009. Any installments on principal and interest not paid when due shall, at the option of the note holder, bear interest thereafter at the rate of twelve percent per annum until paid. On April 27, 2009, the stockholder exercised his option to extend the note, including accrued interest, for an additional ninety days, at the simple interest rate of twelve percent per annum. The entire principal together with accrued interest was due and payable on or before July 14, 2009. The due date on this note was subsequently extended to December 31, 2010.

On November 10, 2009 two stockholders advanced funds to the Company to pay operating expenses. The Company executed two promissory notes for the principal amount of $5,000 each. The notes called for simple interest at the rate of eight percent per annum. The entire principal together with interest was due on or before June 30, 2010. Any installments on principal and interest not paid when due shall, at the option of the note holder, bear interest thereafter at the rate of twelve percent per annum until paid. The stockholders exercised their option to extend the note, including accrued interest, for an additional ninety days, at the simple interest rate of twelve percent per annum. The due date on these notes was subsequently extended to December 31, 2010.

Interest expense for the nine-month periods ended September 30, 2010 and 2009 was $2,710 and $1,753, respectively.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

The Company has a non-cancelable operating lease for its facilities. The lease agreement requires a monthly payment ranging from approximately $2,844 to $3,201 and expires in September 2013. On November 30, 2004, the Company was declared in default on the lease agreement. The lessor temporarily reduced the monthly payment for the months of November 2004 through October 2005 to $2,000 and deferred the remainder of the monthly payments totaling $7,870 that would have been due during this period of time.

The Company exercised its option to renew the lease for an additional 5-year period on September 12, 2008. The portion of the lease payments deferred, which had been included in accounts payable and accrued expenses, was forgiven upon renewal of the lease. The forgiven amount of $7,870 has been deferred as income and is being amortized over the five-year lease at a rate of $131.17 per month. The Company has the option to renew the lease for one additional 5-year term at monthly payments beginning at $3,297 and adjusted annually for inflation. The Company is responsible for all expenses connected with the building, including improvements, utilities, taxes, and repairs. Total rent expense including CAM fees for the nine-month periods ended September 30, 2010 and 2009 was $30,409 and $29,955, respectively.

Future minimum lease payments for the operating lease for the facility are as follows:

Payments Due During the Year

Ended December 31,

2010 $ 9,051

2011 $ 36,475

2012 $ 37,569

2013 $ 28,806

Total $111,901

NOTE 6 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events from the balance sheet date through the date of this filing, and determined there are no events that require disclosure.

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

Certain statements in this Report constitute “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, among others, uncertainties relating to general economic and business conditions; industry trends; changes in demand for our products and services; uncertainties relating to customer plans and commitments and the timing of orders received from customers; announcements or changes in our pricing policies or that of our competitors; unanticipated delays in the development, market acceptance or installation of our products and services; changes in government regulations; availability of management and other key personnel; availability, terms and deployment of capital; relationships with third-party equipment suppliers; and worldwide political stability and economic growth. The words "believe", "expect", "anticipate", "intend" and "plan" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Condensed Financial Statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. Ultra Sun believes there have been no significant changes during the quarter ended September 30, 2010.

Ultra Sun’s accounting policies are more fully described in Note 1 of the audited financial statements. As discussed in Note 1, the preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about the future events that affect the amounts reported in the financial statements and the accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual differences could differ from these estimates under different assumptions or conditions. Ultra Sun believes that the following addresses Ultra Sun’s most critical accounting policies.

We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition.” Revenue is recognized at the point of passage to the customer of title and risk of loss, when there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured.

Our allowance for doubtful accounts is maintained to provide for losses arising from customers’ inability to make required payments. If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required.

Stock-Based Compensation. The Company has stock-based compensation plans. Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASC topic #718 “Fair Value,” using the modified prospective transition method. Under this transition method, stock-based compensation expense for the year ended December 31, 2009 includes compensation expense for all stock-based compensation awards granted during the year, or granted in a prior year if not fully vested as of January 1, 2009.

·	The Company estimates fair value using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows:

·	Expected term is determined using an average of the contractual term and vesting period of the award;

·	Expected volatility of award grants made under the Company's plans is measured using the historical daily changes in the market price of similar industry indices, which are publicly traded, over the expected term of the award;

·	Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and,

Forfeitures are based on the history of cancellations of awards granted by the Company and management's analysis of potential forfeitures.

We account for income taxes in accordance with FASC Topic #740 “Income Taxes.” Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized.

Plan of Operation

We are currently engaged in the operation of a tanning salon. We believe that the tanning salon business has been fragmented and operated primarily as single shop owners. We have spent the last several years developing our salon model and want to be able to expand upon what we have found works best. This includes expanding upon the traditional tanning business to focus on a salon with a broader product offering with other salon amenities besides tanning. We also intend to focus on tanning alternatives including spray on tans and tanning products which, we believe, have improved over recent years and now offer a comparable appearance to traditional outdoor and indoor tanning.

Over the last several years of operations, we believe we have developed a business model that can be applied to multiple locations. We have experimented with the appearance of a tanning salon and offering different services and products for several years. Now, we believe, we have developed an appearance and product category that can be expanded to multiple locations across the country. This expansion will require additional capital and given current economic conditions may require we seek equity investments instead of relying solely on debt financing.

Our future success will be dependent on our ability to open multiple locations. As we look to expand operations, we face many challenges including the current economic environment which has made it difficult, if not impossible, for companies our size and with our financial position to obtain debt financing from banks. Additionally, consumers have been reducing expenditures and although it has not significantly affected our current operations, it is likely, if the recession continues that our business will be negatively affected. In addition to consumers cutting back on spending, recent legislation will add a ten percent tax on tanning salons which we will have to pass along to customers, increasing the cost of tanning. This most likely will have a negative effect on our profitability.

It will be important as we look to expand to be able to raise additional capital either through existing shareholders and management or through outside sources. Future capital raises will likely result in significant dilution to current investors and it is uncertain that we will be able to raise any new capital, particularly in light of the current economic conditions. Without additional capital, we will not be able to start private labeling our own line of tanning products nor expand operations. This inability to expand or private label will restrict our ability to be profitable and increase revenue.

Results of Operations

September 30, 2010 and 2009

For the quarters ended September 30, 2010 and 2009, we had revenues of $28,072 and $31,598, respectively. For the quarter ended September 30, 2010, we had a net loss of $16,839 compared to net loss of $13,735 for the quarter ended September 30, 2009. We are hopeful that the remainder of the year will see increasing revenues as we move into better economic times, but with the institution of a ten percent tanning salon tax, we are uncertain how these additional costs to our customers will affect revenue.

Our expenses for the quarter ended September 30, 2010, remained similar to the quarter ended September 30, 2009. Operating expenses remained relatively unchanged at $35,764 for September 30, 2010, compared to $36,257 for the three months ended September 30, 2009.

Our costs should stay around the current levels so it will be important for us to generate more revenue in the salon to increase net income. The nature of the salon business is such that additional customers have very little additional incremental cost. We should therefore be able to generate more net income by increasing the revenue. This may require additional marketing dollars. Currently, our financial position has not allowed us to focus on marketing and we have relied on location and word of mouth. As we have paid off debt, and with operations stabilizing, we now hope to be able to expend additional monies on marketing. For the quarter ended September 30, 2010, we spent only nominal funds on advertising. We believe even a slight increase in marketing should increase revenues.

For the quarter ended September 30, 2010, our cost of goods sold was $8,167 compared to revenues of $28,072 resulting in a gross profit of $19,905. For the quarter ended September 30, 2009, our cost of goods sold was $8,388 compared to revenues of $31,598 resulting in a gross profit of $23,210. Based on the gross profit margin of approximately 71% we feel it is important to drive more revenues to our salon. We believe additional revenue will result in a larger portion of net income given the incremental cost of additional revenues should be relatively small. We do not anticipate additional revenues causing much of an increase in operating expenses and believe cost of goods sold will remain similar going forward on the tanning side of the business. We will start offering more products at the salon which will have higher cost of goods sold but the additional products should not cause much effect on operating expenses.

Seasonality and Cyclicality

Although our salon receives steady business throughout the year, we experience our busiest seasons in the winter and spring months. We would anticipate this trend to continue. With the ability to offer spray-on tanning, we are seeing more demand for this tanning method in the summer months as people seek to avoid outdoor tanning.

Liquidity and Capital Resources

As of September 30, 2010, we had a working capital deficit of $38,978 compared to a working capital deficit of $30,297 for December 31, 2009. Part of the reason for our working capital deficit is we carry very little inventory, no accounts receivable and had to borrow funds to open the salon and cover initial short-falls. Additionally, with an unexpected drop in revenue we continue to carry debt incurred from shareholders to cover short-falls. We believe we will be able to meet ongoing expenses from revenues in the future and any short-falls will continue to be covered by management. However, management and principal shareholders cannot continue to cover shortfalls and if the business does not turn around, particularly given the new tax, management will have to re-evaluate the business model and long-term ability of achieve profitability.

We have had to rely on short-term funding from management or shareholders to cover ongoing expenses. Management has indicated a willingness to fund any unanticipated short-falls for the next twelve months. We will have to seek additional capital if we try and expand our operations through private labeling products or opening new salons. We will probably seek additional equity financing if we seek additional capital but at this time, the exact amounts are unknown until we have found either salons to acquire or new sites to open. Future expansion will be dependent on additional capital which most likely would cause dilution to current shareholders. For the immediate needs of our current salon, we would seek management and shareholder loans. There can be no assurance that management and shareholders will continue to loan Ultra Sun funds.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

NA-Smaller Reporting Company

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our President and CFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected; however, management believes our controls and procedures provide reasonable assurances.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our management evaluated the effectiveness of our internal control over financial reporting as of September 30, 2010. Based on this evaluation, our management concluded that, as of September 30, 2010, our internal control over financial reporting was effective. However, with the limitations on the ability to provide segregation of duties, our management is actively seeking to add additional management personnel to provide segregation of duties.

Changes in internal control over financial reporting

There have been no changes in internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

None

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

Recent Sales of Unregistered Securities

We have not sold for cash any restricted securities during the three months ended September 30, 2010.

Use of Proceeds of Registered Securities

None; not applicable.

Purchases of Equity Securities by Us and Affiliated Purchasers

During the three months ended September 30, 2010, we have not purchased any equity securities nor have any officers or directors of the Company.

ITEM 3. Defaults Upon Senior Securities

We are not aware of any defaults upon senior securities.

ITEM 4. Removed and Reserved

ITEM 5. Other Information.

None

ITEM 6. Exhibits

(a) Exhibits.

Item 4	Exhibit No.	Instruments Defining the Rights of Security Holders	Location

31.01	31	CEO certification Pursuant
		to 18 USC Section 1350, as
		adopted pursuant to Section 302
		of Sarbanes-Oxley Act of 2002	This Filing

31.02	31	CFO certification Pursuant
		to 18 USC Section 1350, as
		adopted pursuant to Section 302
		of Sarbanes-Oxley Act of 2002	This Filing

32.01	32	CEO Certification pursuant to
		section 906	This Filing

32.02	32	CFO Certification pursuant to
		Section 906	This Filing

* Incorporated by reference from the Company’s registration statement on Form 10-SB filed with the Commission, SEC file no. 0-23502.

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, thereunto duly authorized.

	Ultra Sun Corp.


Date: November 9, 2010	By:	/s/ Neil Blosch
			Neil Blosch, President, Director, Principal
			Financial Officer (Principal Executive
			Officer)

In accordance with the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/Neil Blosch
Neil Blosch	Director	November 9, 2010

/s/ Dave O'Bagy
Dave O'Bagy	Director	November 9, 2010

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