Cannasys (MJTK) 10-Q 2013 Q3 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 September 30, 2013

[  ] 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). Yes [X] No [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “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:  November 12, 2013 – 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	10
Item 3  Quantitative and Qualitative Disclosures About Market Risk	13
Item 4  Controls and Procedures	13
PART II – OTHER INFORMATION
Item 1  Legal Proceedings	14
Item 1A  Risk Factors	14
Item 2  Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3  Defaults Upon Senior Securities	15
Item 4  Mine Safety Disclosures	15
Item 5  Other Information	15
Item 6  Exhibits	15
SIGNATURES	15

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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.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2013 AND DECEMBER 31, 2012
ASSETS
	September 30,			December 31,
	2013			2012
	(Unaudited)
CURRENT ASSETS:
Cash	$	76		$	1,759
Accounts receivable, net		-			819
Prepaids		-			458
Total Current Assets		76			3,036
TOTAL ASSETS	$	76		$	3,036
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	24,367		$	14,921
Accounts payable and accrued expenses-Related parties		36,434			28,614
Notes payable		47,000			32,000
Notes payable-Related parties		92,000			92,000
Total Current Liabilities		199,801			167,535
LONG-TERM LIABILITIES:
Note payable		-			-
Total Liabilities		199,801			167,535
STOCKHOLDERS' DEFICIT:
Capital stock, $.001 par value; 50,000,000 shares authorized;
1,676,000 shares issued and outstanding
at September 30, 2013 and December 31, 2012, respectively		1,676			1,676
Additional paid-in capital		42,579			40,328
Accumulated deficit		(243,980	)		(206,503	)
Total Stockholders' Deficit		(199,725	)		(164,499	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	76		$	3,036

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

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THERMAL TENNIS INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
AND THE THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
	Nine Months Ended						Three Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
SALES, Net of Returns, Allowances and Discounts	$	10,927		$	85,208		$	-		$	32,427
COST OF SALES		8,779			77,610			-			38,029
GROSS PROFIT/(LOSS)		2,148			7,598			-			(5,602	)
EXPENSES:
General and administrative expenses		29,820			39,426			9,551			13,767
TOTAL OPERATING EXPENSES		29,820			39,426			9,551			13,767
(LOSS) BEFORE OTHER (EXPENSE) AND INCOME TAXES		(27,672	)		(31,828	)		(9,551	)		(19,369	)
OTHER (EXPENSE)
Interest expense		(2,924	)		(899	)		(1,160	)		(302	)
Interest expense-Related parties		(6,881	)		(5,845	)		(2,319	)		(2,112	)
Total other (expense)		(9,805	)		(6,744	)		(3,479	)		(2,414	)
LOSS BEFORE INCOME TAXES		(37,477	)		(38,572	)		(13,030	)		(21,783	)
PROVISIONS FOR INCOME TAXES		-			-			-			-
NET LOSS	$	(37,477	)	$	(38,572	)	$	(13,030	)	$	(21,783	)
BASIC LOSS PER SHARE	$	(0.02	)	$	(0.02	)	$	(0.01	)	$	(0.01	)
WEIGHTED AVERAGE SHARES OUTSTANDING		1,676,000			1,676,000			1,676,000			1,676,000

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

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THERMAL TENNIS INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
	September 30,			September 30,
	2013			2012
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(37,477	)	$	(38,572	)
Adjustments to reconcile net loss to net cash used
in operating activities:
Contribution of rent expense by a related party		2,250			2,250
Changes in assets and liabilities:
Decrease/(increase) in accounts receivable		820			(2,033	)
Decrease/(increase) in prepaids		458			(465	)
Increase in accounts payable and accrued expenses-Related parties		7,820			5,845
Increase in accounts payable and accrued expenses		9,446			4,768
Net cash (used) by operating activities		(16,683	)		(28,207	)
CASH FLOWS FROM INVESTING ACTIVITIES:		-			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable		15,000			20,000
Increase in notes payable-Related parties		-			12,000
Net cash provided by financing activities		15,000			32,000
Net (decrease)/increase in cash		(1,683	)		3,793
CASH AT BEGINNING PERIOD		1,759			5,850
CASH AT END OF PERIOD	$	76		$	9,643
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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CONDENSED NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE A - PRESENTATION

The balance sheets of the Company as of September 30, 2013 and December 31, 2012, the related statements of operations for the nine months and three months ended September 30, 2013 and 2012 and the statements of cash flows for the nine months ended September 30, 2013 and 2012, (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 September 30, 2013 and 2012 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 for the year ended December 31, 2012.

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 2012 and 2011.  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. Additionally, due to the current and prior year net operating loss, 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, all due currently, consists of the following:

	September 30,
	2013
Notes payable, due to an individual, 10% interest, principle and interest due January 1, 2014	$	22,000
Note payable, due to an individual, 10% interest, principle and interest due January 1, 2014		5,000
Note payable, due to an individual, 10% interest, principle and interest due January 1, 2014		5,000
Note payable, due to an individual, 10% interest, principle and interest due January 1, 2014		5,000
Note payable, due to an individual, 10% interest, principle and interest due January 1, 2014		5,000
Note payable, due to an individual, 10% interest, principle and interest due January 1, 2014		5,000
		47,000
Less current portion		(47,000	)
	$	-

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NOTE E – NOTES PAYABLE-RELATED PARTIES

The Company’s related party notes payable, all due currently, consists of the following:

	September 30,
	2013
Note payable, due to an individual, 10% interest, principle and interest due January 1, 2014	$	40,000
Notes payable, due to an individual, 10% interest, principle and interest due January 1, 2014(1)(2)		32,000
Notes payable, due to an individual, 10% interest, principle and interest due January 1, 2014(1)		20,000
		92,000
Less current portion		(92,000	)
	$	-

(1)	The notes listed above represent credit lines that allow the Company to borrow up to $25,000 on each note to pay the ongoing expenses of the company.
(2)	The lender made the additional loan above the original terms and conditions of the note without amending the credit line.

NOTE F – RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

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NOTE G – INCOME TAXES

Effective January 1, 2007, we adopted the provisions of ASC 740-10, 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 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 September 30, 2013.

NOTE H – RELATED PARTY TRANSACTIONS

The Company recognized $750 of expense in the three months ended September 30, 2013, which represented the value of the rent associated with the sole officer’s home office.  This amount recognized in the third quarter in the amount of $750 was contributed to additional paid-in capital for the quarter ended September30, 2013.

NOTE I – SUBSEQUENT EVENT

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

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.

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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 past few 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 September 30, 2013 in the amount of $0 versus $32,427 generated during the three months ended September 30, 2012.  This was a decrease of $32,427 for the quarter due to the Company terminating its main contract with a facility in Reno and fewer programs were offered in 2013.  The Company’s net loss during the three months ended September 30, 2013 was $13,030 and for the three months ended September 30, 2012 the loss was $21,783.  The gross revenues decreased due to the reasons stated above, the net loss decreased by $8,753.  This was due to the decrease in general and administrative expenses and a gross profit loss in 2012.  These changes caused a substantial difference in the loss between the two quarters.  The Company expects that it will continue to generate operating losses.  The Company is pursuing other contracts and is seeking other business opportunities that would generate revenues and profitability for the Company.

In March 2013 the Company terminated its contract that represented over ninety percent of its gross revenues.  The Company will be conducting and expanding the High School summer camps with additional focus on High School and College training.  The Company is hoping to provide these programs on a national level and that the revenues generated from the sales of these programs will eventually lead to sufficient profitability and associated cash flows from operations.

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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 September 30, 2013, we had total cash assets of $76, which decreased $1,683 during 2013 due to operations.  We had total assets of $76 as of September 30, 2013.  We had total current liabilities of $199,801 and working deficit and stockholders' deficit of $199,725 as of September 30, 2013.  Deficits accumulated during the history of the Company have totaled $243,980.  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.

At September 30, 2013 the Company has been generating revenues from operations that began in early 2009 and was still seeking capital through obtaining of additional debt in order to continue its operations. The business activities the Company has are 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 will provide sufficient earnings to cover the cost of its operations.  The Company expects the gross revenues will not be sufficient to cover all of its current operations.  The Company will have to obtain additional revenues to become profitable.  At September 30, 2013 and through the date of this filing, the Company has yet to obtain any other commitments for additional funding.  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 September 30, 2013, the Company had not received any additional funding and supported its operations through the increase in vendor financing since the beginning of the year by $17,326 and borrowings from notes payable in the amount of $15,000.  In the year ended December 31, 2012 the Company received $40,000 from borrowings.  The Company expects it will have to borrow additional funds against its credit lines to sustain operations to continue its current operations.  The Company borrowed $10,000 in April 2013 and $5,000 in July 2013 from unrelated parties.

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In March 2013 the Company terminated its contract that represented over ninety percent of its gross revenues.  The Company will be conducting and expanding the High School summer camps with additional focus on High School and College training.  The Company is hoping to provide these programs on a national level and that the revenues generated from the sales of these programs will eventually lead to sufficient profitability and associated cash flows from 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.

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2013, 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.

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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

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Item 3. Defaults Upon Senior Securities.

None; not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None; not applicable.

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.
101	Interactive Data Files

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:	November 13, 2013	By:	/s/Robert R. Deller
			Robert R. Deller, President, Secretary/Treasurer and Director

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