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EX-31.1 - EXHIBIT 31.1 - Cannabis Sativa, Inc.ex311111609.htm
EX-31.2 - EXHIBIT 31.2 - Cannabis Sativa, Inc.ex312111609.htm
EX-32.1 - EXHIBIT 32.1 - Cannabis Sativa, Inc.ex321111609.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, 2009


[   ] 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                                                                                                20-1898270
     (State or other jurisdiction of                                                              (IRS Employer Identification No.)
                                                                               incorporation or organization)

1532 East St. Marks Court, Salt Lake City, Utah                                                                                                      84124
        (Address of principal executive offices)                                                                                                            (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 has not been phased into 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 no par value common stock on November 3, 2009

 
 

 
 
Part I - FINANCIAL INFORMATION

Item 1. Financial Statements
Ultra Sun Corp.
FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2009

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,
 
   
2009
   
2008
 
   
(Unaudited)
       
ASSETS
           
Current assets:
           
     Cash
  $ 7,693     $ 8,068  
     Accounts receivable
    -       302  
     Inventory
    2,446       1,868  
     Prepaid expenses
    -       2,000  
Total current assets
    10,139       12,238  
Fixed assets:
               
     Furniture and equipment
    10,619       10,619  
     Tanning beds
    158,446       158,446  
     Leasehold improvements
    37,250       36,365  
       Total fixed assets
    206,315       205,430  
     Less accumulated depreciation
    (157,763 )     (139,559 )
       Net fixed assets
    48,552       65,871  
Other assets
               
     Deposits
    2,728       2,728  
Total assets
  $ 61,419     $ 80,837  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Liabilities
               
Current liabilities:
               
     Accounts payable and accrued expenses
  $ 4,501     $ 14,230  
     Due to officer (note 4)
    -       212  
     Deferred revenue (note 5)
    1,574       1,574  
     Note payable - related party - current portion (note 4)
    22,000       10,000  
     Accrued interest - notes payable
    1,772       28  
Total current liabilities
    29,847       26,044  
Long-term liabilities
               
     Deferred revenue - long-term portion (note 5)
    4,591       5,771  
Total long-term liabilities
    4,591       5,771  
Total liabilities
    34,438       31,815  
Stockholders' equity (note 4)
               
     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
    (200,660 )     (178,619 )
          Total stockholders' equity
    26,981       49,022  
Total liabilities and stockholders' equity
  $ 61,419     $ 80,837  

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,
 
   
2009
   
2008
   
2009
   
2008
 
Revenue
                       
     Tanning and product sales
  $ 31,598     $ 41,354     $ 153,417     $ 185,985  
     Cost of goods sold
    (8,388 )     (11,704 )     (33,642 )     (42,108 )
                                 
          Gross profit
    23,210       29,650       119,775       143,877  
                                 
Operating Expenses:
                               
     Advertising
    14       150       14       150  
     Depreciation and amortization
    296       2,888       1,228       8,558  
     General and administrative
    7,960       12,975       30,998       35,297  
     Payroll
    13,974       14,680       52,553       50,580  
     Professional fees
    4,297       2,260       25,315       7,397  
     Rent
    9,716       8,573       29,955       25,981  
                                 
Total operating expenses
    36,257       41,526       140,063       127,963  
                                 
Income (loss) from operations
    (13,047 )     (11,876 )     (20,288 )     15,914  
                                 
Other income (expense)
                               
     Interest expense
    (688 )     (331 )     (1,753 )     (1,815 )
                                 
Total other income (expense)
    (688 )     (331 )     (1,753 )     (1,815 )
                                 
Net income (loss)
  $ (13,735 )   $ (12,207 )   $ (22,041 )   $ 14,099  
                                 
Net income (loss) per share
  $ (0.01 )   $ (0.01 )   $ (0.02 )   $ 0.01  
                                 
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.

 
 

 


 
Statements of Cash Flows
 
(Unaudited)
 
           
         
For the Nine Months Ended
 
 
September 30,
 
 
2009
   
2008
 
           
Operating Activities
         
Net income (loss)
$ (22,041 )   $ 14,099  
               
Adjustments to reconcile net income (loss) to net cash
             
  provided by (used in) operating activities:
             
     Depreciation and amortization
  18,204       25,535  
               
Changes in operating assets and liabilities:
             
       (Increase) decrease in inventory
  (578 )     (1,116 )
       (Increase) decrease in accounts receivable
  302       -  
       (Increase) decrease in prepaid expenses
  2,000       -  
       Increase (decrease) in accounts payable
             
         and accrued expenses
  (9,729 )     (29,246 )
       Increase (decrease) in due to officer
  (212 )     -  
       Increase (decrease) in accrued interest
  1,744       (44 )
       Increase (decrease) in deferred revenue
  (1,180 )     7,739  
Net cash provided by (used in) operating activities
  (11,490 )     16,967  
               
Investing Activities
             
     Acquisition of furniture, fixtures & equipment
  (885 )     (2,101 )
Net cash used in investing activities
  (885 )     (2,101 )
               
Financing Activities
             
     Principal payments on notes payable
  -       (43,323 )
     Cash borrowed from related parties
  12,000       548  
Net cash provided by (used in) financing activities
  12,000       (42,775 )
               
Net increase (decrease) in cash
  (375 )     (27,909 )
Cash at beginning of period
  8,068       42,725  
Cash at end of period
$ 7,693     $ 14,816  
               
Supplemental disclosures
             
     Interest paid in cash
$ 9     $ 1,859  
               
The accompanying notes are an integral part of these unaudited financial statements.

 
 

 

ULTRA SUN CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008

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, 2008.  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 three and nine month periods ended September 30, 2009 are not necessarily indicative of the operating results that may be expected for the full year ending December 31, 2009.

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 FASC Topic #850, “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 $15,543 for the period June 1, 2006 through December 31, 2008 which begins to expire in 2026.  The tax benefit of this net operating loss, based on an effective rate of 35% for federal and 5% for state, was approximately $6,217 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, 2009, the Company recorded net income (loss) before income taxes of ($13,735) and ($22,041), respectively.  There are no deferred income taxes 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 have been fully offset by valuation allowances, in accordance with FACS Topic 740 “Income Taxes” due to the uncertainty of their realization.

The Company follows the provisions of uncertain tax provisions as addressed in FASB ASC 740-10-65-1. The Company recognized approximately no increase in the liability for unrecognized tax benefits.

 
 

 
 
ULTRA SUN CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008

NOTE   2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company has no tax positions at September 30, 2009 and 2008 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.  The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.  No such interest or penalties were recognized during the periods presented.  The Company had no accruals for interest and penalties on income taxes at September 30, 2009 or 2008.

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 are 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 revenues at the time the gift certificates are sold.

Recent Accounting Pronouncements

In June 2009 the FASB established the Accounting Standards Codification ("Codification" or "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.

Statement of Financial Accounting Standards ("SFAS") SFAS No. 165 (ASC Topic 855), "Subsequent Events", SFAS No. 166 (ASC Topic 810), "Accounting for Transfers of Financial Assets-an Amendment of FASB Statement No. 140", SFAS No. 167 (ASC Topic 810), "Amendments to FASB Interpretation No. 46(R)", and SFAS No. 168 (ASC Topic 105), "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162" were recently issued. SFAS No. 165, 166, 167, and 168 have no current applicability to the Company or their effect on the financial statements would not have been significant.

Accounting Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair Value  Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU's No. 2009-2 through ASU No. 2009-15 which 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.

 
 

 

ULTRA SUN CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008

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 capital paid in excess of par value.

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 in full during June 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 calls for simple interest at the rate of eight percent per annum.  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, 2009.

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 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 interest was due and payable on or before July 14, 2009.  The due date on this note was subsequently extended to December 31, 2009.
 
 
 

 

ULTRA SUN CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008

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 calls 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 30, 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 July 14, 2009.  The due date on this note was subsequently extended to December 31, 2009.

Interest expense for the three and nine-month periods ended September 30, 2009 was $688 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.  As of November 30, 2004, the Company was 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 5-year lease at a rate of $131 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 for the three and nine month periods ended September 30, 2009 was $9,716 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,
2009                                               $    8,787
2010                                               $  35,412
2011                                               $  36,475
2012                                               $  37,569
2013                                               $  28,806
Total                                             $ 147,049



NOTE 6 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events from the balance sheet date through November 13, 2009, 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, 2009.

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, 2008 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 are hoping to expand by purchasing additional salons and opening new salons to capitalize on the industry fragmentation.  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 with each location being profitable and providing a steady income stream.  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.

It is our goal to open multiple locations and then be able to expand into our own line of private label tanning and beauty products that we can sell at our locations.  We have already been focusing on up selling clients with different tanning and beauty products and found sufficient receptiveness to the product sales that we believe it can become a revenue channel for us.  We believe with multiple locations, we can purchase in bulk at reduced prices and receive better profit margins off of tanning and beauty product sales.

Our future success will be dependent on our ability to open multiple locations.  We have been looking for new sites for several additional salons and believe we can obtain sufficient debt financing for the next two to three stores but beyond that number we will need to have additional equity infusions.  Debt financing will require guarantees from current management who have indicated a willingness to continue to provide personal guarantees for initial planned expansion.

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.  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, 2009 and 2008

For the quarter ended September 30, 2009 and 2008, we had revenues of $31,598 and $41,354, respectively.  For the quarter ended September 30, 2009, we had a net loss of $13,735 and for the nine months ended September 30, 2009, we had a net loss of $22,041 on revenues of $153,417.  This compares with net income of $14,099 for the nine months ended September 30, 2008 on revenues of $185,985.  We believe the reduction in income reflects the general economic conditions of the economy as consumers have reduced their discretionary spending.  We are hopeful that the remainder of the year will see increasing revenues as we move out of the summer months into fall and winter.  Also, as the economy improves we are hopeful that consumers will start spending again.

Our expenses for the quarter ended September 30, 2009, remained similar to the quarter ended September 30, 2008, with a minor reduction related to the reduction in overall business.   Our cost of goods decreased slightly as a result of lower sales and we would anticipate cost of goods sold to remain at similar levels in the future.  Operating expenses decreased slightly to $36,257 from $41,526 for the three months ended September 30, 2009 and 2008, respectively.  These cost reductions were the results of staff savings do to the lower customer demand. General and administrative expense decreased slightly as slower demand reduced overtime and the need for extra employees.

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, we have not focused on marketing and 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, 2009, we spent only nominal funds on advertising.  We believe even a slight increase in marketing should increase revenues.   As with most businesses we have seen a slight decrease in revenues as the recession continued to worsen.  We believe this trend will continue at least through summer but will hopefully ease as we move more into the fall and winter months.  We are hopeful with our current cost structure that we will not have significant losses during this ongoing challenging economic times.

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.  For the quarter ended September 30, 2008, our cost of goods sold was $11,704 compared to revenues of $41,354 resulting in a gross profit of $29,650.  Based on the gross profit margin of approximately 73% 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, 2009, we had a working capital deficit of $19,708 compared to a working capital deficit of $13,806 for December 31, 2008.  Part of the reason for our working capital deficit is we carry very little inventory and have 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 had to borrow funds 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.  We also believe as we have refined our business model that we will not face short-falls as we did in the past as we tried different salon structures and appearances.  We are hopeful in future quarters that our working capital deficit will be reduced further as we continue to pay off debt.  We have been able to pay off all of our initial long- term debt from revenue and initial equity investments.

 
 

 
 
Although we have reduced our overall indebtedness, we have had to rely on short-term funding from management or shareholders to cover ongoing expenses. We believe as our overall indebtedness has decreased, we should start to be able to cover ongoing expense from revenues once the economy stabilizes.  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.  As our current revenues seem to have stabilized and we have sufficient revenues to fund ongoing operations, any future capital would be raised and used for expansion.  Management will most likely continue to fund ongoing short-falls.  With the current economy, revenues could decrease in which case we would have to rely on additional capital sources.  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.

As we move to expand our operations, we anticipate incurring new debt as we open new salons.  Our goal is to balance debt financing with equity investments.  We anticipate each new salon will take approximately two to three years to pay off the debt associated with its opening and the purchase of equipment.  We believe that after the first year each new salon should be able to finance its own debt associated with its opening and pay all of the salon’s management cost.   Given current economic conditions of the economy in general, our estimates may have to be revised if consumers further reduce discretionary spending.  If consumers reduce discretionary spending, we may delay further salon openings until the economy is better.

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 4T.  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.
 
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, 2009.  Based on this evaluation, our management concluded that, as of September 30, 2009, 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, 2009.

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, 2009, 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.  Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the quarter ended September 30, 2009.

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 13, 2009                                          By:  /s/ Neil Blosch                                                               
Neil Blosch, President, Director, Principal
Accounting 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 13, 2009

/s/ Dave O'Bagy           Director                                November 13, 2009
Dave O'Bagy