Attached files
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| EX-31.1 - EX 31.1 - CANNASYS INC | exthirtyoneone.htm |
| EX-32.1 - EX 32.1 - CANNASYS INC | exthirtytwoone.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
____________________
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[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 ( d ) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2011
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 ( d ) OF THE EXCHANGE ACT
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For the transition period from ____________ to____________
Commission File No. 333-150883
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THERMAL TENNIS INC.
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(Exact name of Registrant as specified in its charter)
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Nevada
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88-0367706
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(State or Other Jurisdiction of
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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4950 Golden Springs Drive
Reno, Nevada 89509
(Address of Principal Executive Offices)
(775) 560-6659
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) 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 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). N/A since the registrant is neither required nor permitted to post Interactive Data Files.
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 “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] 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 ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: May 16, 2011 – 1,676,000 shares of common stock.
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THERMAL TENNIS INC.
Table of Contents
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Page
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PART I – FINANCIAL INFORMATION
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Item 1 Financial Statements
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3
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Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
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9
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Item 3 Quantitative and Qualitative Disclosures About Market Risk
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11
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Item 4 Controls and Procedures
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11
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PART II – OTHER INFORMATION
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Item 1 Legal Proceedings
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12
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Item 1A Risk Factors
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12
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Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
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12
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Item 3 Defaults Upon Senior Securities
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13
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Item 4 (Removed and Reserved)
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13
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Item 5 Other Information
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13
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Item 6 Exhibits
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13
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SIGNATURES
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13
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PART I
Item 1. Financial Statements
The Financial Statements of the Registrant required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant.
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THERMAL TENNIS INC.
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BALANCE SHEETS
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MARCH 31, 2011 AND DECEMBER 31, 2010
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ASSETS
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March 31,
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December 31,
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2011
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2010
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(Unaudited)
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CURRENT ASSETS:
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Cash
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$ | 2,575 | $ | 2,330 | ||||
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Accounts receivable, net
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666 | 1,326 | ||||||
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Prepaids
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1,805 | 433 | ||||||
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Total Current Assets
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5,046 | 4,089 | ||||||
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TOTAL ASSETS
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$ | 5,046 | $ | 4,089 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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CURRENT LIABILITIES:
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Accounts payable and accrued expenses
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$ | 17,615 | $ | 18,565 | ||||
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Accounts payable and accrued expenses-Related parties
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15,278 | 14,076 | ||||||
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Notes payable-Related parties-Current maturities
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59,000 | 46,000 | ||||||
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Total Current Liabilities
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91,893 | 78,641 | ||||||
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Total Liabilities
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91,893 | 78,641 | ||||||
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STOCKHOLDERS' DEFICIT:
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Capital stock, $.001 par value; 50,000,000 shares authorized;
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1,676,000 shares issued and outstanding
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at March 31, 2011 and December 31, 2010, respectively
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1,676 | 1,676 | ||||||
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Additional paid-in capital
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35,079 | 34,116 | ||||||
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Accumulated deficit
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(123,602 | ) | (110,344 | ) | ||||
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Total Stockholders' Deficit
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(86,847 | ) | (74,552 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$ | 5,046 | $ | 4,089 | ||||
The accompanying notes are an integral part of these financial statements.
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THERMAL TENNIS INC.
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STATEMENTS OF OPERATIONS
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FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
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March 31,
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March 31,
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2011
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2010
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(Unaudited)
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(Unaudited)
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SALES, Net of Returns, Allowances and Discounts
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$ | 10,143 | $ | 11,435 | ||||
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COST OF SALES
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9,417 | 11,178 | ||||||
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GROSS PROFIT
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726 | 257 | ||||||
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EXPENSES:
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General and administrative expenses
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12,570 | 8,788 | ||||||
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TOTAL OPERATING EXPENSES
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12,570 | 8,788 | ||||||
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(LOSS) BEFORE OTHER (EXPENSE) AND INCOME TAXES
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(11,844 | ) | (8,531 | ) | ||||
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OTHER INCOME/(EXPENSE)
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Interest income
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- | 1 | ||||||
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Interest expense-Related parties
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(1,414 | ) | (986 | ) | ||||
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Total other income/(expense)
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(1,414 | ) | (985 | ) | ||||
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PROVISIONS FOR INCOME TAXES
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- | - | ||||||
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NET LOSS
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$ | (13,258 | ) | $ | (9,516 | ) | ||
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BASIC LOSS PER SHARE
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$ | (0.01 | ) | $ | (0.01 | ) | ||
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WEIGHTED AVERAGE SHARES OUTSTANDING
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1,676,000 | 1,675,000 | ||||||
The accompanying notes are an integral part of these financial statements.
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THERMAL TENNIS INC.
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STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
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March 31,
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March 31,
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2011
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2010
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(Unaudited)
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(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ | (13,258 | ) | $ | (9,516 | ) | ||
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Adjustments to reconcile net loss to net cash used
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in operating activities:
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Contribution of rent expense by a related party
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750 | - | ||||||
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Changes in assets and liabilities:
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Decrease in accounts receivable
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660 | 835 | ||||||
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(Increase) in prepaids
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(1,372 | ) | (1,294 | ) | ||||
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Increase in accounts payable and accrued expenses
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465 | 7,172 | ||||||
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Net cash provided (used) by operating activities
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(12,755 | ) | (2,803 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES:
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- | - | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from notes payable
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13,000 | - | ||||||
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Proceeds from the sale of common stock
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- | 1,000 | ||||||
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Net cash provided by financing activities
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13,000 | 1,000 | ||||||
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Net increase/(decrease) in cash
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245 | (1,803 | ) | |||||
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CASH AT BEGINNING PERIOD
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2,330 | 7,735 | ||||||
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CASH AT END OF PERIOD
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$ | 2,575 | $ | 5,932 | ||||
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SUPPLEMENTAL CASH FLOW INFORMATION:
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Cash paid for income taxes
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$ | - | $ | - | ||||
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Cash paid for interest expense
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$ | - | $ | - | ||||
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NON-CASH TRANSACTION
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Contribution of accrued interest by a related party
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$ | 213 | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
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THERMAL TENNIS INC.
CONDENSED NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE A - PRESENTATION
The balance sheets of the Company as of March 31, 2011 and December 31, 2010, the related statements of operations for the three months ended March 31, 2011 and 2010 and the statements of cash flows for the three months ended March 31, 2011 and 2010, (the financial statements) include all adjustments (consisting of normal recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. The results of operations for the three months ended March 31, 2011 and 2010 are not necessarily indicative of the results of operations for the full year or any other interim period. The information included in this set of financial statements should be read in conjunction with Management's Discussion and Analysis and Financial Statements and notes thereto included in the Company's Form 10-K.
NOTE B - REVENUE RECOGNITION
The Company recognizes revenue in accordance with the Securities and Exchange Commission Staff Accounting Bulletin (SAB) number 104, which states that revenues are generally recognized when it is realized and earned. Specifically, the Company recognizes revenue when services are performed and projects are completed and accepted by the customer. Revenues are earned from tennis lessons, sales of ball machines and other related services.
NOTE C - GOING CONCERN
The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated a net loss from its operations in 2010 and 2009. Additionally, the revenue base of the Company is seasonal and the Company receives a majority of its revenues in the second and third quarters of the calendar year. It also sustained operating losses in prior years and due to the current and prior year net operating losses, the Company currently has a deficit in its stockholders’ equity account. These factors raise substantial doubt as to its ability to obtain debt and/or equity financing and achieving future profitable operations.
Management intends to raise additional operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors. Ultimately, the Company will need to achieve profitable operations in order to continue as a going concern.
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There are no assurances that Thermal Tennis Inc. will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to Thermal Tennis Inc. If adequate working capital is not available Thermal Tennis Inc. may be required to curtail its operations.
NOTE D – NOTES PAYABLE
The Company’s notes payable consists of the following:
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March 31, 2011
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Note payable, due to an individual, 10% interest, principle and interest due June 1, 2011(1)(2)
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$ | 32,000 | ||
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Note payable, due to an individual, 10% interest, principle and interest due June 1, 2011(1)
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20,000 | |||
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Note payable, due to an individual, 10% interest, principle and interest due June 1, 2011
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7,000 | |||
| 59,000 | ||||
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Less current portion
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(59,000 | ) | ||
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(1)
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The notes listed above both represent credit lines that allow the Company to borrow up to $25,000 on each note to pay the ongoing expenses of the company.
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(2)
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The lender made the additional loan above the original terms and conditions of the note without amending the credit line.
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NOTE E – RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
There have been no developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on our financial statements, from those disclosed in the our Annual Report on Form 10-K for the year ended December 31, 2010.
NOTE F – INCOME TAXES
Effective January 1, 2007, we adopted the provisions of ASC 740-10 (formerly known as FIN No. 48, Accounting for Uncertainty in Income Taxes). ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740-10 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The application of income tax law is inherently complex. Laws and regulation in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding the income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes in the subjective assumptions and judgments can materially affect amounts recognized in the balance sheets and statements of income.
At the adoption date of January 1, 2007, we had no unrecognized tax benefit, which would affect the effective tax rate if recognized. There has been no significant change in the unrecognized tax benefit during the three months ended March 31, 2011.
NOTE G – RELATED PARTY TRANSACTIONS
The Company recognized $750 of expense in the three months ended March 31, 2011, which represented the value of the rent associated with the sole officer’s home office. This amount recognized plus the balance due to the officer at December 31, 2010 in the amount of $213 was contributed to additional paid-in capital for the quarter ended March 31, 2011.
NOTE H – SUBSEQUENT EVENT
The Company has evaluated subsequent events pursuant to ASC855 and has determined that there are no reportable subsequent events.
However, in April 2011 an officer of the Company made an additional loan to the Company in the amount of $9,000 to cover the costs of operations.
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Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations.
Forward-looking Statements
Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Plan of Operations
Our business is to develop tennis management programs, tennis training programs, sales of tennis equipment and general services related to tennis. Thermal Tennis has devoted substantially all of their time and effort to organizational and financing matters during the last three years. Through the date hereof, we have not yet generated material service revenue during this period and we have realized a net loss from operations. We generated revenues during the three months ended March 31, 2011 in the amount of $10,143 versus $11,435 for the same prior period. During the quarters ended March 31, 2011 and 2010, the Company had no revenues from commissions on the sale of the ball machines. The Company’s net loss during the three months ended March 31, 2011 was $13,258 and for the three months ended March 31, 2010 the loss was $9,516. The majority reason for the increase in the net loss was due to additional professional fees incurred in the first quarter of 2011. Until additional clients are obtained, the Company expects that it will continue to generate operating losses.
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The Company completed its’ S-1 offering in the summer of 2010. The Company had expected the proceeds from the offering would have provided enough capital to sustain its losses until profitability could be obtained. However, certain parties have lent a total of $59,000 to the Company. The parties lent $13,000 in 2011, $6,000 in 2010, $10,000 in 2008 and $30,000 to the company during 2007, and additional funds will be needed to continue on its limited operations. An additional $9,000 was lent to the Company in April 2011 and the Company expects it will have to continue to borrow money to sustain its operations in the next twelve months. We do not anticipate the performance of any research and development during the next 12 months.
There can be no assurance that we will achieve commercial acceptance for any of our proposed tennis services in the future; that future service revenue will materialize or be significant; that any sales will be profitable; or that we will have sufficient funds available for further development of our proposed services. The likelihood of our success will also depend upon our ability to raise additional capital from equity and/or debt financing to overcome the problems and risks described herein; to absorb the expenses and delays frequently encountered in the operation of a new business; and to succeed in the competitive environment in which we will operate. Although management intends to explore all available alternatives for equity and/or debt financing, including, but not limited to, private and public securities offerings, there can be no assurance that we will be able to generate additional capital. Our continuation as a going concern is dependent on our ability to generate sufficient cash flow to meet our obligations on a timely basis and, ultimately, to achieve profitability.
Financial Condition, Capital Resources and Liquidity
As of March 31, 2011, we had total cash assets of $2,575, which was derived from the loans made to the company totaling $59,000 and $44,000 from proceeds by selling stock subscriptions of its common stock under the S-1 offering. We had total assets of $5,046. We had total current liabilities of $91,893 and working deficit and stockholders' deficit of $86,847 as of March 31, 2011. Deficits accumulated during the history of the company have totaled $123,602. Our financial statements are presented on the basis that Thermal Tennis is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. However, our independent accountants have noted that the Company has accumulated losses from operations and has the need to raises additional financing in order to satisfy its vendors and other creditors and execute its business plan. These factors raise substantial doubt about our ability to continue as a going concern. Our future success will be dependent upon our ability to provide effective and competitive tennis services that meet customers' changing requirements. Should Thermal Tennis' efforts to raise additional capital through equity and/or debt financing fail, Robert Deller, our President/Secretary/Treasurer, is expected to provide the necessary working capital so as to permit Thermal Tennis to continue as a going concern.
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At March 31, 2011 the Company has been generating revenues from operations that began in early 2009 and was still seeking capital through a stock offering or the obtaining of additional debt in order to continue its operations. The contract the Company has obtained is seasonal and it receives a majority of the revenues and earnings in the second and third quarters of the calendar year. The Company does not know if the revenues under this contract will provide sufficient earnings to cover the cost of its operations. During 2011, this contract contributed $726 to its overhead. The Company expects this gross margin from operations will increase, but it expects the gross revenues will not be sufficient to cover all of its current operations. The Company will have to obtain additional contracts to become profitable. At March 31, 2011 and through the date of this filing, the Company has yet to obtain any other commitments for additional funding. As of the date hereof, the Company has received a total of $44,000 of stock subscriptions under its completed stock offering and $59,000 through borrowings. The Company expects it will have to borrow additional monies to provide enough working capital to continue its operations during the next twelve months and to execute its business plan. In the quarter ended March 31, 2011, the Company received $13,000 from borrowings. In the year ended December 31, 2010 the Company received $6,000 from borrowings and in December 31, 2008, the Company received $10,000 in proceeds from debt and $30,000 in 2007. The Company has borrowed an additional $9,000 in April 2011. The Company expects it will have to borrow additional funds against its credit lines to sustain operations to continue its current operations.
Until the Company obtains the capital required to develop any properties or businesses and obtains the revenues needed from its future operations to meet its obligations, the Company will depend on sources other than operating revenues to meet its operating and capital needs. Operating revenues may never satisfy these needs.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2011, our disclosure controls and procedures were, subject to the limitations noted above, effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
Our management, with the participation of the chief executive officer and chief financial officer, has concluded there were no significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not required.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
- 12 -
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. (Removed and Reserved).
Item 5. Other Information.
None.
Item 6. Exhibits.
Exhibit No. Identification of Exhibit
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31
32
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Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of Robert R. Deller.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Robert R. Deller.
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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
THERMAL TENNIS INC.
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Date:
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May 16, 2011
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By:
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/s/Robert R. Deller
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Robert R. Deller, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director
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- 13 -