Cannasys (MJTK) 10-Q 2010 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

____________________

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

For the quarterly period ended March 31, 2010

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

For the transition period from ____________ to____________

Commission File No. 333-150883

THERMAL TENNIS INC.

(Exact name of Registrant as specified in its charter)

Nevada	88-0367706
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

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 14, 2010 – 1,676,000 shares of common stock.

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THERMAL TENNIS INC.

Table of Contents

	Page
PART I – FINANCIAL INFORMATION
Item 1  Financial Statements	3
Item 2  Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3  Quantitative and Qualitative Disclosures About Market Risk	14
Item 4  Controls and Procedures	14
PART II – OTHER INFORMATION
Item 1  Legal Proceedings	15
Item 1A  Risk Factors	15
Item 2  Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3  Defaults Upon Senior Securities	15
Item 4  (Removed and Reserved)	15
Item 5  Other Information	15
Item 6  Exhibits	15
SIGNATURES	16

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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.
BALANCE SHEETS
MARCH 31, 2010 AND DECEMBER 31, 2009
ASSETS
	March 31,			December 31,
	2010			2009
	(Unaudited)
CURRENT ASSETS:
Cash	$	6,682		$	7,735
Accounts receivable, net		113			948
Due from officer		2,038			2,788
Prepaids		1,762			468
Total Current Assets		10,595			11,939
TOTAL ASSETS	$	10,595		$	11,939
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	12,621		$	6,436
Accounts payable and accrued expenses-Related parties		10,471			9,484
Notes payable-Related parties-Current maturities		40,000			40,000
Total Current Liabilities		63,092			55,920
Total Liabilities		63,092			55,920
STOCKHOLDERS' DEFICIT:
Capital stock, $.001 par value; 50,000,000 shares authorized;
1,676,000 and 1,672,000 shares issued and outstanding
at March 31, 2010 and December 31, 2009, respectively		1,676			1,672
Additional paid-in capital		34,116			33,120
Accumulated deficit		(88,289	)		(78,773	)
Total Stockholders' Deficit		(52,497	)		(43,981	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	10,595		$	11,939

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

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THERMAL TENNIS INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
	March 31,			March 31,
	2010			2009
	(Unaudited)			(Unaudited)
SALES, Net of Returns, Allowances and Discounts	$	11,435		$	3,597
COST OF SALES		11,178			2,605
GROSS PROFIT		257			992
EXPENSES:
General and administrative expenses		8,788			9,772
TOTAL OPERATING EXPENSES		8,788			9,772
(LOSS) BEFORE OTHER (EXPENSE) AND INCOME TAXES		(8,531	)		(8,780	)
OTHER INCOME/(EXPENSE)
Interest income		1			43
Interest expense-Related parties		(986	)		(986	)
Total other income/(expense)		(985	)		(943	)
PROVISIONS FOR INCOME TAXES		-			-
NET LOSS	$	(9,516	)	$	(9,723	)
BASIC LOSS PER SHARE	$	(0.01	)	$	(0.01	)
WEIGHTED AVERAGE SHARES OUTSTANDING		1,675,000			1,618,956

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

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THERMAL TENNIS INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
	March 31,			March 31,
	2010			2009
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(9,516	)	$	(9,723	)
Adjustments to reconcile net loss to net cash used
in operating activities:
Changes in assets and liabilities:
(Increase)/Decrease in accounts receivable		835			(795	)
Decrease in due from officer		750			982
(Increase) in prepaids		(1,294	)		-
Increase in accounts payable and accrued expenses		7,172			5,446
Net cash provided (used) by operating activities		(2,053	)		(4,090	)
CASH FLOWS FROM INVESTING ACTIVITIES:		-			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock		1,000			16,750
Net cash provided by financing activities		1,000			16,750
Net increase/(decrease) in cash		(1,053	)		12,660
CASH AT BEGINNING PERIOD		7,735			17,018
CASH AT END OF PERIOD	$	6,682		$	29,678
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes	$	-		$	-
Cash paid for interest expense	$	-		$	-

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, 2010 and December 31, 2009, the related statements of operations for the three months ended March 31, 2010 and 2009 and the statements of cash flows for the three months ended March 31, 2010 and 2009, (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, 2010 and 2009 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 2009 and 2008 because the major source of its revenues was dropped as an account in 2006.  However, the Company in February of 2009 picked up its first contract in three years.  This contract is seasonal and the Company expects a majority of its revenues is earned in the second and third quarters of the calendar year.  It also sustained operating losses in prior years before obtaining this account.  Additionally, due to the current and prior year net operating loss, the Company currently has a deficit in its stoc kholders’ 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:

	March 31,2010
Note payable, 10% interest, principle and interest due September 6, 2010(1)	$	20,000
Note payable, 10% interest, principle and interest due September 6, 2010(1)		20,000
	$	40,000

(1)   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.

NOTE E – RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS

In January 2010, the FASB issued new guidance that both expanded and clarified the disclosure requirements related to fair value measurements.  Entities are required to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 of the fair value valuation hierarchy and describe the reasons for the transfers.  Additionally, entities are required to disclose and roll forward Level 3 activity on a gross basis rather than as one net number.  The new guidance also clarified that entities are required to provide fair value measurement disclosures for each class of assets and liabilities.  In addition, entities are required to provide disclosures about the valuation techniques and inputs used to measure fair value of assets and liabilities that fall within Level 2 or Level 3 of the fair value valuation hierarchy.  The new disclosures were adopted by the Company on January 1, 2010 and do not have an impact on our financial statements.

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Amendments to Accounting Standards Codification: In February 2010, the FASB issued ASU No. 2010-08, Technical Corrections to Various Topics (“ASU 2010-08”). ASU 2010-08 makes various non-substantive amendments to the FASB Codification that does not fundamentally change existing GAAP; however, certain amendments could alter the application of GAAP relating to embedded derivatives and the income tax aspects of reorganization. The amended guidance is effective beginning in the first interim or annual period beginning after the release of the ASU, except for certain amendments. The Company will adopt the guidance in the second quarter of 2010. The Company does not anticipate this adoption will have a material impact on its financial statements.

On February 24, 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855)—Amendments to Certain Recognition and Disclosure Requirements (“ASU 2010-09”). ASU 2010-09 removes the requirement that SEC filers disclose the date through which subsequent events have been evaluated. This amendment alleviates potential conflicts between Subtopic 855-10 and the SEC’s requirements. The guidance became effective with the issuance of ASU 2010-09 and the Company adopted this guidance upon its issuance.

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 exposure s. 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, 2010.

NOTE G – RELATED PARTY TRANSACTIONS

The Company has advanced the President $2,038 at March 31, 2010.  This loan is non-interest bearing and due upon demand.  The Company recognized $750 of expense in the three months ended March 31, 2010 associated with this loan, which represented the value of the rent associated with the sole officer’s home office.

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NOTE H – STOCK SUBSCRIPTIONS

As of March 31, 2010, the Company has received a total of $44,000 under its stock offering, representing 176,000 shares of its common stock subscribed at $.25 per share.

In the quarter ended March 31, 2010, the Company has received a total of $1,000 under its stock offering, representing 4,000 shares of its common stock subscribed at $.25 per share.

NOTE I – SUBSEQUENT EVENT

The Company has evaluated subsequent events pursuant to ASC 855 and has determined that there are no reportable subsequent events.

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Item 2. Management’s Discussion 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.

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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, 2010 in the amount of $11,435.  During the quarter ended March 31, 2010, the Company had no revenues from commissions on the sale of the ball machines or operations.  The Company’s net loss during the three months ended March 31, 2010 was $9,516 and for the three months ended March 31, 2009 the loss was $9,723.& #160; Until additional clients are obtained, the Company expects that it will continue to generate operating losses.

Total expenses for the three months ended March 31, 2010 were $19,966.  We filed an S-1 that became effective July 24, 2008 and expect that these offering proceeds will satisfy our cash requirements for at least for a year and that it will not be necessary, during that period, to raise additional funds to meet the expenditures required for operating our business. As of the date hereof, we have received stock subscriptions representing 172,000 shares of our common stock under our offering of 600,000 shares at a price of $.25 per share for gross proceeds of $44,000.  However until the offering is completed, certain parties have lent a total of $40,000 to the Company.  The parties lent $10,000 in 2008 and $30,000 to the company during 2007, and additional funds will be needed to continue on its limited o perations.  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.

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Financial Condition, Capital Resources and Liquidity

As of March 31, 2010, we had total cash assets of $6,682, which assets were derived from the loans made to the company totaling $40,000 and $44,000 from proceeds by selling stock subscriptions of its common stock under the S-1 offering. We had total current liabilities of $63,092 and working deficit and stockholders' deficit of $52,497 as of March 31, 2010.  Deficits accumulated during the history of the company have totaled $88,289.  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 f inancing 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.

At March 31, 2010 the Company has been generating revenues on its first contract to commence operations that began in early 2009 and was still seeking capital through a stock offering or the obtaining of additional debt in order to resume operations. The contract the Company has obtained is seasonal and it expects a majority of the revenues and earnings is 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 2009, this contract contributed $3,266 to its overhead.  The Company expects this gross margin from operations will increase in 2010, but it expects the gross revenues will not be sufficient to cover all of its current operations.  The Company wil l have to obtain additional contracts to become profitable.  At March 31, 2010 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 offering, and it expects to raise an additional $106,000 under the offering.  The Company expects that the gross proceeds from its offering will provide enough working capital to continue its operations during the next twelve months and to execute its business plan.   In the year ended December 31, 2008, the Company received $10,000 in proceeds from debt and $30,000 in 2007.  The Company expects it will have to borrow additional funds against its credit lines to sustain operations until the offering of its securities is completed.

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.

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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.

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2010, 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.

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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.

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

31    32 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.

Date:	May 19, 2010	By:	/s/Robert R. Deller
			Robert R. Deller, Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer and Director

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