As filed with the Securities and Exchange Commission on January 14, 2003
Registration No. 333-101551
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
UNIVERSAL TANNING VENTURES, INC.
(Exact name of Registrant as specified in its charter)
______________________
Delaware 729901 80-0025175
(State or other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or organization) Classification Code Number) I.D. No.)
______________________
600 East Altamonte Drive, Unit 1050
Altamonte Springs, Florida 32701
(407) 260-9206
(407) 650-2785 (Facsimile)
(Address, including zip code, and telephone and facsimile numbers, including
area code, of registrant's executive offices)
______________________
Glen Woods
Chief Executive Officer
Universal Tanning Ventures, Inc.
4044 W. Lake Mary Boulevard, #104-347
Lake Mary, Florida 32746
(407) 260-9206
(407) 650-2785 (Facsimile)
(Name, address, including zip code, and telephone and facsimile numbers,
including area code of agent for service)
______________________
Copies to:
Frank S. Ioppolo, Jr., Esq.
Greenberg Traurig, P.A.
450 South Orange Street, Suite 650
Orlando, Florida 32801
(407) 420-1000
(407) 420-5909 (Facsimile)
______________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
______________________
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, as amended, check here:[X]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[_]
______________________
CALCULATION OF REGISTRATION FEE
======================================================================================================
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Each Class of Securities to be Price Per Offering Registration
to be Registered Registered Shares /(1)/ Price /(1)/ Fee
Common stock, $0.0001 par value ............ 1,000,000 $ 1.00 $ 1,000,000 $ 92 /(2)/
======================================================================================================
________
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act.
(2) Previously paid.
______________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 14, 2003
1,000,000 Shares
Universal Tanning Ventures, Inc.
Common Stock
$1.00 Per Share
We own and operate a single indoor tanning salon business that offers a
full range of indoor tanning products and services to our customers. Our goal is
to become the first nationally branded total indoor tanning company that
provides a full range of indoor tanning products and services to consumers
throughout the United States.
This is our initial public offering. We are offering 1,000,000 shares of
our common stock. The offering is "self-underwritten" on a best efforts basis.
There are no minimum purchase requirements and no requirement to place funds in
an escrow, trust or similar account. Any funds raised from this offering will be
available to us immediately for use. The latest date on which this offering will
close will be 90 days after the date of this prospectus, but may be extended for
an additional 30 days if we choose to do so.
The initial public offering price of our common stock will be $1.00 per
share. This price has been arbitrarily determined.
No public markets currently exist for our shares. There can be no assurance
that an active trading market will develop for our common stock.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
============================================================================================
Public Offering Selling
Price Commissions /(1)/ Proceeds to Us/(2)/
----------------- ------------------- ---------------------
Per Share ............... $ 1.00 $0.00 $ 1.00
Total if maximum sold ... $1,000,000 $0.00 $1,000,000
============================================================================================
(1) We are offering the shares directly through our officers. No compensation
will be paid to our officers in connection with their efforts regarding the
offer and the sale of our shares.
(2) Does not include estimated offering expenses of approximately $61,200.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
Prospectus dated _____________, 2003
TABLE OF CONTENTS
-----------------
Page
----
Special Note About Forward-Looking Statements .................................................. 1
Prospectus Summary ............................................................................. 2
Summary Consolidated Financial Information ..................................................... 4
Risk Factors ................................................................................... 5
Use of Proceeds ................................................................................ 10
Dilution ....................................................................................... 12
Dividend Policy ................................................................................ 13
Capitalization ................................................................................. 13
Selling Security Holders ....................................................................... 13
Management's Discussion and Analysis of Financial Condition and Results of Operations .......... 14
Business ....................................................................................... 21
Management ..................................................................................... 29
Principal Stockholders ......................................................................... 31
Certain Transactions ........................................................................... 32
Market For Our Common Stock and Related Stockholder Matters .................................... 33
Description of Capital Stock ................................................................... 34
Shares Eligible for Future Sale ................................................................ 34
Plan of Distribution ........................................................................... 35
Legal Matters .................................................................................. 35
Experts ........................................................................................ 36
Available Information .......................................................................... 37
Index to Consolidated Financial Statements ..................................................... F-1
________________
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from the
information contained in this prospectus. We are offering to sell, and seeking
offers to buy, our common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of when this prospectus is delivered or
when any sale of our common stock occurs.
Until ____________, 2003, 25 days after the commencement of this offering,
all dealers that buy, sell or trade shares of our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
________________
In this Prospectus unless otherwise indicated, all references herein to (i)
"we," "our," "our company" or "the company" are references to Universal Tanning
Ventures, Inc., a Delaware corporation, including our wholly-owned subsidiary UT
Holdings, Inc., a Delaware corporation; (ii) "common stock" refers to our
authorized and outstanding common stock, par value $0.0001 per share; and (iii)
"fiscal year," "financial year" or "year" refers to our fiscal year ended
December 31.
i
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus, including
the sections entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" that are based on our
management's beliefs and assumptions and on information currently available to
our management. Forward-looking statements include the information concerning
our possible or assumed future results of operations, business strategies,
financing plans, competitive position, industry environment, potential growth
opportunities, the effects of future regulation and the effects of competition.
Forward-looking statements include all statements that are not historical facts
and can be identified by the use of forward-looking terminology such as the
words "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar
expressions.
Forward-looking statements involve risks, uncertainties and
assumptions. Actual results may differ materially from those expressed in the
forward-looking statements. We do not have any intention or obligation to update
forward-looking statements after we distribute this prospectus.
You should understand that many important factors, in addition to those
discussed elsewhere in this prospectus, could cause our results to differ
materially from those expressed in the forward-looking statements. These factors
include, without limitation, the rapidly changing industry and regulatory
environment, our limited operating history, our ability to implement our growth
strategy, our ability to integrate acquired companies and their assets and
personnel into our business, our fixed obligations, our dependence on new
capital to fund our growth strategy, our ability to attract and retain quality
personnel, our competitive environment, perceived health issues associated with
tanning generally and tanning booths in particular, economic and other
conditions in markets in which we operate, increases in maintenance costs and
insurance premiums and cyclical and seasonal fluctuations in our operating
results.
1
PROSPECTUS SUMMARY
The following summary information about our company and the common
stock that we are offering is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this prospectus. Prospective investors should read this entire
prospectus carefully, especially the information disclosed under the "Risk
Factors" section, the "Forward-Looking Statements" section and the Financial
Statements and Notes to the statements, which are included elsewhere in the
prospectus.
UNIVERSAL TANNING VENTURES, INC.
Overview
We own and operate a single indoor tanning salon business that offers a
full range of indoor tanning products and services to our customers. The revenue
from this single salon accounts for 100% of our total revenues.
We are a Delaware corporation formed for the purpose of acquiring the
business of Altamonte Tan, Inc., a single indoor tanning salon previously owned
and operated by our president, Glen Woods. Through our wholly owned subsidiary,
UT Holdings, Inc., we acquired substantially all of the assets and assumed
certain liabilities of Altamonte Tan, Inc. on February 28, 2002 in exchange for
$30,000. We have continued to operate the business of Altamonte Tan since our
acquisition of its assets under the name "Universal Tanning." Although the
Altamonte Tan has been in operation for 5 years prior to our acquisition, our
own independent pre-acquisition revenues and operations have been de minimis and
consequently this offering involves a very high degree of risk. See "Risk
Factors."
Strategy
Our goal is to become the first nationally branded total indoor tanning
company that provides a full range of indoor tanning products and services to
consumers throughout the United States. We intend to establish a network of
indoor tanning salons throughout the United States through which we can offer
tanning sessions, tanning packages, tanning lotions and accelerators, and
tanning accessories. Our tanning professionals expect to offer educational
information and tanning news to our customers. We intend to grow our business by
opening new locations and acquiring other operating salons.
We believe that developments in the indoor tanning industry are drawing
more media attention to indoor tanning. This increased exposure, new tanning
equipment, and developments in tanning safety should result in an increase in
the market for indoor tanning related products and services. However, the indoor
tanning industry is highly fragmented. We believe that to succeed, companies
will need to provide extensive product selection, detailed product information
and other value added services while aggregating all aspects of the tanning
experience in multiple, easy to access locations. Currently, we do not believe
there is a company that offers the "total" tanning solution by providing
customers a single source with access to all indoor tanning related products,
services and information. Our strategy is to become that "single source" by
utilizing online information and services, multiple physical locations and an
interconnected network of salons to become the total tanning company and a
leading provider of tanning related goods and services.
We have analyzed the indoor tanning industry and have developed a model
for the sale of tanning sessions, tanning packages, lotions and accelerators,
and tanning accessories. We intend to build a network of indoor tanning salons
through which we can offer our products and services. We intend to create this
network of salons through both organic growth and acquisition of existing
salons. We also intend to implement a membership program that will allow the
members to use the tanning services purchased at any of our network salons. We
expect this strategy to allow us to grow our revenue through (i) the increased
sales of our products and services in our existing salon; (ii) the opening and
operation of new salons; and (iii) the creation and sale of new member benefits,
products and services, including the member option of utilizing our products and
services at multiple locations.
2
Corporate Information
We were incorporated under the laws of the State of Delaware on January
4, 2002. Our sole tanning salon and principal executive offices are located at
600 E. Altamonte Drive, Unit 1050, Florida 32701, and our telephone number is
(407) 260-9206; our mailing address is 4044 W. Lake Mary Boulevard, #104-347,
Lake Mary, Florida 32746.
The Offering
Common stock offered by
Universal Tanning Ventures, Inc. .................. 1,000,000 shares
Price per share offered /(1)/ ..................... $1.00
Common stock outstanding prior to offering ........ 7,500,000 shares
Common stock outstanding after offering
assuming 100% of the offering is sold ............. 8,500,000 shares
Use of proceeds ................................... We expect to use the net
proceeds for marketing and
advertising expenses, the
opening of a new location,
potential acquisitions,
working capital and other
general corporate
purposes. See Use of
Proceeds.
___________
/(1)/ There is no established public trading market for the common stock being
sold pursuant to this prospectus. We have arbitrarily determined the
price of the shares in this offering. The offering price is not an
indication of and is not based upon the actual value of our business. It
bears no relationship to the book value, assets or earnings of the
company or any other recognized criteria of value. The offering price
should not be regarded as an indicator of the future market price of the
securities.
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3
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary of consolidated financial data set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited financial
statements and related notes thereto included elsewhere in this prospectus. Our
historical results are not necessarily indicative of future results.
Universal Tanning
Altamonte Tan, Inc. Ventures, Inc.
-------------------- --------------------
Year Ended Nine Months Ended
Operating Data December 31, 2001 September 30, 2002
-------------- -------------------- --------------------
Total sales revenue .......................... $ 104,530 $ 68,954
Cost of sales ................................ 97,818 64,175
Selling, general and administrative .......... 32,638 244,893
Net loss ..................................... (32,106) (238,934)
Net loss per share, basic and diluted /(1)/ .. $ (0.01) $ (0.04)
Weighted average common shares
outstanding, basic and diluted /(1)/ ......... 6,040,091 6,040,091
September 30, 2002
------------------
Balance Sheet Data Actual
------------------ ------------------
Cash and cash equivalents .................. $ 82,495
Current liabilities ........................ 19,801
Total debt ................................. -
Total stockholders' equity ................. $ 324,066
__________
(1) Although Altamonte Tan, Inc. was an S-corporation, net loss per common
share has been computed on a pro-forma basis as if Altamonte Tan, Inc.'s
weighted average number of common shares had been outstanding for the 9
months ended September 30, 2002. Such information is unaudited.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
4
RISK FACTORS
The purchase of the shares involves a high degree of risk. Accordingly,
each prospective purchaser should carefully read this prospectus in its entirety
and should consider the following risks and speculative features inherent in and
affecting this offering and our business. An investment in the shares should be
made only by persons who can afford an investment involving such risks and who
are able to sustain a loss of their entire investment.
Risks Specific to Our Company
Since we are in the early stage of development and have a limited operating
history, it may be difficult for you to assess our business and future
prospects.
We were incorporated on January 4, 2002 and currently own and operate a
single tanning salon. Although we acquired substantially all the assets and
assumed certain liabilities from an operating business, we have no independent
history. Our goal is to substantially grow our business through acquisition and
organic growth. We do not have relevant historical financial data on which to
base planned operating expenses for more than a single location. There is
nothing at this time upon which to base an assumption that our plans will prove
successful, and there is no assurance that we will be able to profitably operate
multiple tanning salons.
We have a history of losses that may continue, requiring us to seek additional
sources of capital that may not be available, requiring us to curtail or cease
operations.
We incurred net losses of $32,106 for the year ended December 31,
2001. For the nine months ended September 30, 2002, we incurred a net loss of
$238,934. We cannot assure you that we can achieve or sustain profitability on a
quarterly or annual basis in the future. If revenues grow more slowly than we
anticipate, or if operating expenses exceed our expectations or cannot be
adjusted accordingly, we will continue to incur losses. In addition, we will
require additional funds to sustain and expand our single tanning salon
business, and to begin to implement our business plan. We anticipate that we
will require up to approximately $100,000 to fund our continued operations of
our single tanning salon for the next twelve months, depending on revenue from
operations. There can be no assurance that financing will be available in
amounts or on terms acceptable to us, if at all. The inability to obtain
sufficient funds from operations or external sources would require us to curtail
or cease operations.
We will need additional capital, the availability of which is uncertain, to fund
our business and complete the implementation of our business plan.
Irrespective of whether we are successful in selling the maximum number
of shares offered under this prospectus, after the net proceeds of the offering
have been exhausted, we will require additional financing in order to carry out
our business plan. Such financing may take the form of the issuance of common or
preferred stock or debt securities, or may involve bank financing. There can be
no assurance that we will obtain such additional capital on a timely basis, on
favorable terms, or at all. If we are unable to generate the required amount of
additional capital, our ability to meet our financial obligations and to
implement our business plan may be adversely affected.
Our officers and directors do not have experience in managing a public company;
this may negatively impact our business operations.
Our current management has not had any previous experience managing a
public company or a large operating company. There can be no assurance that we
will be able to effectively manage the expansion of our operations, that our
systems, procedures, or controls will be adequate to support our operations or
that our management team will be able to achieve the rapid execution necessary
to fully exploit the market opportunity. Any inability to operate our business,
manage our growth, comply with the regulatory requirements of a company subject
to regulation by governmental agencies such as the Securities & Exchange
Commission could reduce the efficiency
5
of our business operations, thereby causing our operating expenses to increase
and our operating margins to decrease.
Our management may be unable to effectively integrate our acquisitions and to
manage our growth and we may be unable to fully realize any anticipated benefits
of these acquisitions.
Our future results will depend in part on our success in implementing
our acquisition strategy. This strategy includes effecting acquisitions of
tanning salons with complementary or desirable new product lines, strategic
locations and attractive customer bases and supplier relationships. Our ability
to implement this strategy will be dependent on our ability to identify,
consummate and successfully assimilate acquisitions on economically favorable
terms. In addition, acquisitions involve a number of special risks that could
adversely effect our operating results, including the diversion of management's
attention, failure to retain key acquired personnel, risks associated with
unanticipated events or liabilities, legal, accounting and other expenses
associated with the acquisition of each tanning salon, some or all of which
could increase our operating costs, reduce our revenues and cause a material
adverse effect on our business, financial condition and results of operations.
We operate in highly competitive market and may not be able to compete
effectively, which could result in additional losses.
The tanning market is highly competitive. We compete with other tanning
companies, health clubs and spas that have significantly larger operations and
greater financial, marketing, human and other resources than ours. Since these
companies have resources which substantially exceed our own, they may be able to
attract and retain better personnel, acquire superior tanning equipment,
internal systems technologies and develop and implement superior marketing
programs. If we cannot compete successfully against such competitors, it will
impair our ability to ultimately establish our market position.
If we are unable to hire and retain key personnel, then we may not be able to
implement our business plan.
Our performance is substantially dependent on the performance of our
senior management. In particular, our success depends on the continued efforts
of our president and Chief Executive Officer, Glen Woods. While we have an
employment agreement in place with Mr. Woods until February 2004, we have not
obtained any "key man" or other insurance in connection with the life or
employment of Mr. Woods. The loss of Mr. Woods' services could have a material
adverse affect on our business, operational results, and financial condition.
We believe that our future success will also depend in large part upon
our ability to attract and retain highly skilled managerial and marketing
personnel. We face competition for such personnel from other companies. There
can be no assurance that we will be successful in hiring or retaining the
personnel we require.
We are, and will continue to be, controlled by our officers and directors and
principal stockholders which could result in us taking actions that other
stockholders do not approve.
Assuming receipt of the maximum offering proceeds, current officers,
directors and principal stockholders will continue to own of record, or
beneficially a majority of the issued and outstanding shares of common stock.
Purchasers of shares hereunder will be minority stockholders of the company and,
although entitled to vote on any matters that require stockholder approval, will
not control the outcome of such votes.
Risks Specific to Our Industry
Changes in the public's perception of the health risks associated with indoor
tanning could reduce demand for our products, resulting in reduced revenues.
The indoor tanning industry has been the subject of much media coverage
as the industry has grown. The success of our business is dependant upon the
consuming public sustaining a belief that the benefits of indoor tanning
outweigh the risks of exposure to ultraviolet light. Any significant change in
public perception of indoor
6
tanning brought about by media reports, scientific studies, governmental
reports, rumors or otherwise which correlate tanning to a significant increase
in the likelihood of skin cancer or other skin diseases, could cause our
customers to stop or reduce their use of our products and services, thereby
reducing our revenue and causing a material adverse affect on our business,
financial conditions and results of operations.
Seasonal fluctuations in demand for our products and services may have an
adverse impact on our operating results.
Our business is seasonal in nature and is also subject to economic
fluctuations. These economic fluctuations impact our business the most during
periods of significant decline in general economic conditions or rise in
uncertainties regarding future economic prospectus. The purchase of our tanning
services and products are discretionary and tend to decline during such periods,
where disposable income tends to be lower.
Use of our services declines during the summer months (June, July and
August) when natural sunlight is available for outdoor tanning. Seasonal
variations in consumer use of indoor tanning facilities can materially affect
our ability to sell services resulting in uneven sales and operational cash flow
among fiscal quarters.
Changes in government regulations could reduce demand for our products or even
ban our products, resulting in reduced revenues or the ceasing of operations.
The Food and Drug Administration has stated that it believes that
indoor tanning can increase the risk of skin cancer, eye damage, skin aging and
allergic reactions. Indoor tanning can result in injuries including severe
sunburn. For these and many other reasons, the industry is regulated by the Food
and Drug Administration. The FDA has set stringent rules and regulations that
govern the manufacturing and use of indoor tanning devices. Many states have
also followed suit and regulate the indoor tanning industry at the salon level.
In addition, the result of some of these Regulations is the migration of
companies to offer more expense or better-rated products and services, thereby
further increasing costs. The adoption of additional laws or regulations may
decrease the growth of the indoor tanning industry, which could, in turn,
decrease the demand for our products and services and increase our cost of doing
business, or otherwise have a negative effect on our business.
Risks Specific to this Offering
As our management has broad discretion with respect to the use of the net
proceeds from this offering, you have no definitive information as to the
application of the proceeds.
We have identified uses for most of the proceeds from this offering;
however, we will have broad discretion in how we use them. We are unable to
commit to how much of the proceeds will be used for any identified purpose
because circumstances regarding our planned uses of the proceeds may change. You
will not have the opportunity to evaluate the economic, financial or other
information on which we base our decisions on how to use the proceeds. The
failure of our management to apply the funds effectively could adversely affect
our financial performance by delaying the implementation of all or part of our
business plan and increasing the costs associated with its implementation. In
order to accommodate changing circumstances or opportunities, our management may
reallocate or adjust the proceeds of this offering among the purposes specified
in the section of this prospectus "Use of Proceeds." Accordingly, our management
team will have broad discretion in the application of the proceeds of this
offering. As a result of the foregoing, our success will be dependent upon the
discretion and judgment of our management with respect to the applicable and
allocation of the net proceeds of this offering. Thus, the proceeds may be
insufficient to accomplish the objectives set forth in this prospectus.
There is no minimum sale requirement or purchase commitment for this offering
and therefore you will be unable to withdraw your funds regardless of the number
of shares sold.
We will use our reasonable best efforts to sell all of the shares
offered hereby. These sales may be made directly by us, through our officers.
No one has made any commitment to purchase any of the shares offered hereby.
Consequently, there can be no assurance that any of the shares will be sold.
Additionally, there is
7
no minimum purchase required to effect the consummation of this offering.
Subject to a right of an investor resident in certain states to rescind his
subscription, since subscriptions by investors to purchase shares in this
offering are irrevocable upon receipt and acceptance by the company, there is a
risk that this offering will be consummated with us receiving aggregate gross
proceeds significantly less than the maximum amount of $1,000,000. We will
deposit checks into our treasury and the funds will be out to immediate use. To
the extent that the net proceeds raised are substantially less than the maximum
amount, our opportunities would be severely diminished. In the event that an
alternate source of financing is not obtained in a timely manner, those
investors who participate in this offering risk the loss of their entire
investment.
Future sales of shares may adversely impact the value of our stock.
The total amount of shares covered by this prospectus would represent
approximately 12% of the number of shares if all of the shares were sold. If
required, we will seek to raise additional capital through the sale of our
common stock. Future sales of our common stock could cause the market price of
our common stock to decline.
A purchase of shares will result in you sustaining immediate and substantial
dilution.
Upon the closing of this offering, investors in this offering will
incur an immediate and substantial dilution (assuming the maximum number of
shares is sold). A purchaser of the common stock will incur immediate and
substantial dilution of about $0.86 per share, or 86% of such purchaser's
investment in the common stock at an offering price of $1.00 per share, in that
the net tangible book value of a share of common stock after the offering will
be approximately $0.14 per share.
If a market were to develop for our shares, the share prices may be highly
volatile.
The market prices of equity securities of small companies have
experienced extreme price volatility in recent years not necessarily related to
the individual performance of specific companies. Accordingly, the market price
of our shares following this offering may be highly volatile. Factors such as
announcements by us, or our competitors concerning products, technology,
governmental regulatory actions, other events affecting tanning companies
generally and general market conditions may have a significant impact on the
market price of our shares and could cause it to fluctuate substantially.
Possible issuance of additional shares sales may impact the price of our stock
should a public trading market ever develop.
Our Certificate of Incorporation authorizes the issuance of 10,000,000
shares of common stock. Upon the sale of the maximum shares offered in this
offering, approximately 15% of our authorized common stock will remain
un-issued. Our Board of Directors has the power to issue any or all of such
additional common stock without stockholder approval. Potential investors should
be aware that any stock issuances might result in a reduction of the book value
or market price, if any, of the then outstanding common stock. If we were to
issue additional common stock, such issuance will reduce proportionate ownership
and voting power of the other stockholders. Also, any new issuance of common
stock may result in a change of control.
The value and transferability of our shares may be adversely impacted by the
lack of a trading market for our shares and the penny stock rules should such a
market develop.
There is no current trading market for our shares and there can be no
assurance that a trading market will develop, or, if such trading market does
develop, that it will be sustained. To the extent that a market develops for our
shares at all, they will likely appear in what is customarily known as the "pink
sheets" or, assuming we are able to satisfy the requisite criteria, on the NASD
OTCBB, which may limit their marketability and liquidity.
To date, neither we, nor anyone acting on our behalf has taken any
affirmative steps to request or encourage any broker/dealer to act as a market
maker for our shares. Further, we have not had any discussions with any market
maker regarding the participation of any market maker in the future trading
market, if any, for our
8
shares. In addition, holders of our shares may experience substantial difficulty
in selling their securities including as a result of the "penny stock rules,"
which restrict the ability of brokers to sell certain securities of companies
whose assets or revenues fall below the thresholds established by those rules.
The offering price of the shares was arbitrarily determined by us and thus, is
not an indication of our stock's valuation.
Prior to this offering, there has been no public trading market for our
common stock. The initial public offering price of the shares has been
arbitrarily determined by us and does not bear any relationship to established
valuation criteria such as assets, book value or prospective earnings. Among the
factors considered by us were the proceeds to be raised by this offering, the
lack of trading market, the amount of capital to be contributed by the public in
proportion to the amount of stock retained by present stockholders and our
capital requirements over the next 18 months.
9
USE OF PROCEEDS
The following table sets forth our use of proceeds if 100%, 75%, 50%,
25% and 10% of the shares of our common stock are sold pursuant to this
prospectus, after deducting estimated expenses of this offering ($61,200):
Assuming Assuming Assuming Assuming Assuming
Sale of 100% Sale of 75% Sale of 50% Sale of 25% Sale of 10%
of of of of of
Stock Being Stock Being Stock Being Stock Being Stock Being
Application Offered Offered Offered Offered Offered
- ----------------------------------- ------------ ------------ ------------ ------------ ------------
Gross proceeds $1,000,000 $750,000 $500,000 $250,000 $100,000
Less offering costs (61,200) (61,200) (61,200) (61,200) (61,200)
---------- -------- -------- -------- --------
Net offering proceeds $ 938,800 $688,800 $438,800 $188,800 $ 38,800
Use of net proceeds:
Potential acquisitions ............ $ 150,000 $150,000 $ 90,000 $ 44,400 $ -
Marketing and advertising ......... 150,000 115,000 80,000 44,400 -
Opening of a new location(s) ...... 150,000 150,000 100,000 - -
Working capital/1/ and other
general corporate purposes ........ 488,800 273,800 168,800 100,000 38,800
---------- -------- -------- -------- --------
Total ....................... $ 938,800 $688,800 $438,800 $188,800 $ 38,800
========== ======== ======== ======== ========
___________________________
/1/ Working Capital includes, without limitation, overhead, telephone,
insurance, postage, office supplies, advertising, payroll, rental expenses,
expenses related to the operation of our single tanning salon and other
miscellaneous expenses.
The foregoing represents management's current expectations regarding
the use of proceeds. Although we expect to utilize the proceeds of this offering
as set for the above, factors that cause our revenue or profitability to
decrease or our operating expenses to increase may cause management to
reallocate, in whole or in part, the proceeds among the uses specified above or
other uses. The factors that may impact our utilization of the proceeds from
this offering include, without limitation, the market conditions of the tanning
industry, general economic conditions (including for example the worsening of
current economy, economic instability created by possible hostile conflicts
involving the United States military, and acts of terrorism), the operations of
our single tanning salon, business and acquisition opportunities, the success of
our marketing and sales activities, the growth of our customer base, our ability
to control our expenses as we attempt to grow our single salon business and
develop a network of tanning salons and our ability to grow our gross revenues
from operations. Accordingly, our management will have significant flexibility
in applying the net proceeds of this offering.
There is no minimum number of shares that must be sold in this
offering, and there is no guarantee that we will be successful in selling any
shares. No escrow account has been established and all subscription funds will
be paid directly to us. In the event we are not successful in raising financing
under this offering or we raise only nominal financing, we will have to raise
additional funds or we will not be able to pursue our goal of becoming a
nationally branded indoor tanning company. If additional financing does not
become available, or if available, it is not on terms and conditions
satisfactory to us, our board of directors would most likely liquidate and
dissolve the business, unless an alternative means of furthering our business
plan could be found.
If we are unsuccessful in raising the maximum amount and management
does reallocate the proceeds of this offering, our first priority after the
payment of expenses related to this offering will be to maintain and then grow
the operations of our single tanning salon. Thereafter, management intends to
use the proceeds in whatever manner, in light of all of the circumstances at
that time, will best further Universal Tanning's business goal of becoming a
nationally branded indoor tanning company. At the current time, we believe
allocating the proceeds of
10
this offering towards potential acquisitions and our marketing and advertising
programs would best further our business goals. Should there be any material
changes in the above projected use of proceeds in connection with this offering
prior to the closing of the offering, we will issue an amended prospectus
reflecting such changes.
Based upon our current plans and assumptions, to sustain and grow our
single tanning salon and to begin to implement our business plan, we anticipate
that our capital requirements for at least 12 months following the closing of
this offering will be satisfied if we receive $250,000 from the sale of 250,000
shares of our common stock under this prospectus. If we sell less than the
maximum number of shares offered hereunder, or our plans change or our
assumptions prove to be inaccurate, we may need to seek additional financing
sooner than currently anticipated or curtail our operations. We cannot be
certain that additional financing will become available if needed, or if
available, whether it will be on terms and conditions satisfactory to us.
We will invest proceeds not immediately required for the purposes
described above principally in investment grade, interest bearing securities,
including without limitation, certificates of deposit, money market accounts,
short-term government securities or similar instruments. Any income from these
short-term investments will be used for working capital.
11
DILUTION
The difference between the initial public offering price per share and
the net tangible book value per share of common stock after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share is determined by dividing total tangible assets less total liabilities
by the number of outstanding shares of common stock.
At September 30, 2002, we had a net tangible book value of $284,066 or
approximately $0.04 per share. After giving effect to the sale of the 1,000,000
shares being offered at an initial public offering price of $1.00 per share and
expenses of this offering, our adjusted net tangible book value at September 30,
2002 would have been $1,222,866 or approximately $0.14 per share, representing
an immediate increase in net tangible book value of $0.10 per share to the
existing stockholders, and representing an immediate dilution of $0.86 or 86%
per share to new investors.
The following table illustrates the above information with respect to
dilution to new investors on a per share basis:
Pro Forma Unaudited
-----------------------------------------------------------------------
1,000,000 750,000 500,000 250,000 100,000
Shares Shares Shares Shares Shares
(100%) (75%) (50%) (25%) (10%)
Sold Sold Sold Sold Sold
-------------- ------------ -------------- ------------ -------------
Initial public offering price ............... $1.00 $1.00 $1.00 $1.00 $1.00
Net tangible book value per share as of
September 30, 2002 .......................... 0.04 0.04 0.04 0.04 0.04
Increase (decrease) in pro forma net
tangible book value per share
attributable to new investors ............... 0.10 0.08 0.05 0.02 0.00
Pro forma net tangible book value per
share after this offering ................... 0.14 0.12 0.09 0.06 0.04
Dilution per share to new investors ......... $0.86 $0.88 $0.91 $0.94 $0.96
Percent dilution per share to new
investors ................................... 86% 88% 91% 94% 96%
The following table summarizes, on a pro forma basis as of September
30, 2002, the difference between the number of shares of common stock purchased
from us, the total consideration paid to us, and the average price per share
paid, by existing stockholders and by new investors, at an assumed initial
public offering price of $1.00 per share before deducting estimated sales
commissions and estimated offering expenses payable by us:
Average
Shares Purchased Total Consideration Price Per
------------------------- -------------------------
Number Percent Amount Percent Share
------------- ---------- ------------- ----------- -----------
Existing stockholders ........... 7,500,000 88% $ 625,500 38% $0.08
New investors ................... 1,000,000 12 1,000,000 62 1.00
--------- ---- ---------- ---- -----
Total ...................... 8,500,000 100% $1,625,500 100% $0.19
========= ===== ========== ===== =====
12
DIVIDEND POLICY
We have never declared or paid any dividends to the holders of our
common stock and we do not expect to pay cash dividends in the foreseeable
future. We currently intend to retain all earnings for use in connection with
the expansion of our business and for general corporate purposes. Our board of
directors will have the sole discretion in determining whether to declare and
pay dividends in the future. The declaration of dividends will depend on our
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by our board of directors. Our ability to pay cash
dividends in the future could be limited or prohibited by the terms of financing
agreements that we may enter into or by the terms of any preferred stock that we
may authorize and issue.
Because we do not intend to pay any dividends, stockholders must rely
on stock appreciation for any return on their investment in our common stock.
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
2002:
Actual
------------
Common Stock, par value $0.0001; 10,000,000
shares authorized; 7,500,000 shares issued
and outstanding $ 750
Additional Paid in Capital 562,250
Accumulated Deficit (238,934)
---------
Total Stockholders' Equity $ 324,066
=========
SELLING SECURITY HOLDERS
There are no selling security holders in this offering.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
consolidated financial statements, including the related notes, appearing
elsewhere in this prospectus. The following discussion and analysis contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ significantly from those discussed in the forward-looking
statements as a result of the various factors set forth under "Risk Factors" and
elsewhere in this prospectus.
Overview
We own and operate a single indoor tanning salon business that offers a
full range of indoor tanning products and services to our customers. The revenue
from this single salon accounts for 100% of our total revenues.
90% of our products are lotions; the remaining 10% consist of stickers,
drinks, sunglasses and protective eyewear. We carry approximately 80-100
different lotion products ranging from sample packets to premier lotion
products. Prices range on our lotion products from $4 for sample products to $55
for premier lotion products.
Our services are comprised of single tanning sessions, multi-session
tanning packages, term memberships and upgrades. Single tanning sessions can be
purchased on one of our 5 different types of tanning beds at prices ranging from
$8 to $16. Our multi-session packages consist of the purchase of 5 or 10 tans on
any one of our different types of beds. On each of the beds, we offer term
memberships of 1 month. With each term membership, a customer can tan on that
specific bed an unlimited number of times over the course of a month. Due to the
wide variety of tanning choices, we offer upgrade packages so that clients can
increase their tanning experience with an upgrade package to a more powerful
tanning bed.
Our expenses from the operation of this single indoor tanning salon
consist primarily of lease expenses for the tanning salon store location,
payroll and related expenses, costs of tanning products, insurance and
utilities.
Revenue recognition. Substantially all of our revenue is generated
through the delivery of tanning services and the tanning product sales. Revenue
is recognized as services are provided or products are purchased.
Cost of services. Cost of services consists of direct costs to provide
services to our customers and primarily includes certain salaries, wages and
related fringe benefits of our employees directly serving customers, the cost of
inventory and the allocation of occupancy costs.
Selling, general and administrative. Selling, general and
administrative expenses include the salaries and wages and related fringe
benefits of our employees not performing work directly for customers, and
occupancy and other costs necessary to support those employees. Among the
functions included in these expenses are sales and marketing and corporate
services (accounting, information systems support, legal and human resources).
In future periods we expect our general and administrative expenses to increase
as a result of our incurring customary costs associated with being a public
company. Summary of Altamonte Tan, Inc. Acquisition
Our president, Glen Woods, owned and operated Altamonte Tan, Inc., a
single indoor tanning salon business. We acquired the business of Altamonte Tan,
Inc. on February 28, 2002. Through our wholly owned subsidiary, UT Holdings,
Inc., we acquired substantially all of the assets and assumed certain
liabilities of Altamonte Tan, Inc. in exchange for $30,000. We have continued to
operate the business of Altamonte Tan, Inc. since our acquisition of its
business under the name "Universal Tanning." Although the business we acquired,
Altamonte Tan, Inc., has been in operation for 5 years prior to our acquisition,
our own independent pre-acquisition revenues and operations have been de
minimis.
14
The acquisition of Altamonte Tan, Inc. was accounted for in accordance
with Statement of Financial Accounting Standard ("SFAS") No. 141 "Business
Combinations" ("SFAS 141"), which requires all business combinations initiated
after June 30, 2001 to be accounted for under the purchase method. SFAS 141 also
sets forth guidelines for applying the purchase method of accounting in the
determination of intangible assets, including goodwill acquired in a business
combination, and expands financial disclosures concerning business combinations.
The assets acquired and liabilities assumed were recorded at estimated fair
values as determined by our management, based on information available and on
assumptions as to future operations.
Plan of Operation
Universal Tanning Ventures, Inc. was formed on January 4, 2002 and
acquired the business of Altamonte Tan, Inc. on February 28, 2002. Our business
currently consists of a single tanning salon located in Altamonte Springs,
Florida. Our goal is to become a total indoor tanning company that provides a
full range of indoor tanning products and services to consumers through a
national network of indoor tanning salons. Our plan of operations has two major
components: running the business we have today as well as possible, and
launching our national network strategy. Our plans will be significantly
impacted by our ability to raise capital in this offering.
Minimum 12 month requirements. During the next 12 months, we plan on
satisfying our cash needs from the proceeds of this offering, and, if necessary,
the proceeds from other capital raising activities. To operate the business of
our existing tanning salon and to begin to implement our national network
strategy will need a minimum of $250,000 for the next 12 months.
If we raise less than $250,000 (25% of this offering). If we raise less
than $250,000 in this offering our ability to implement of business plan and
strategies will be severely limited. Our first priority will be to pay the
expenses related to this offering. Then, we intend to focus the available
capital resources of the company on operating the business that we have, the
single tanning salon located in Altamonte Springs, Florida. We would expect to
utilize the available funds for working capital. Finally, we would allocate the
remaining funds to the initiation of a marketing and advertising plan that could
be built upon as we expand.
It is unlikely that we would be able to expand our business in
accordance with our plan to develop a national network of tanning salons. If we
sell less than the maximum shares offered hereunder, we will need to seek
additional financing sooner than anticipated or curtail our operations or
expansion plans. We cannot be certain that additional financing will become
available if needed, or if available, whether it will be on terms and conditions
satisfactory to us. If we raise on nominal funding or if additional financing
does not become available, or if available, it is not on terms and conditions
satisfactory to us, our board of directors would most likely liquidate and
dissolve the business, unless an alternative means of furthering our business
plan could be found.
If we raise between $250,000 and $1,000,000 (between 25% and 100% of
this offering). If we raise between $250,000 and $1,000,000 in this offering we
will be well positioned to implement our business plan and expansion strategies.
The more money we raise, the better able we will be to initiate our expansion
strategies. Our first priority will be to pay the expenses related to this
offering. Then, we intend to focus the available capital resources of the
company on operating the business that we have, the single tanning salon located
in Altamonte Springs, Florida. The availability of additional funds will permit
us to actively expand our business through both acquisitions of other tanning
business and our establishment of new tanning salons. As we open new locations
we intend to initiate a marketing and advertising campaign to begin branding our
business. The available capital will also be utilized as working capital in
connection with the operation of the new and acquired tanning salon locations.
Raising the maximum $1,000,000 amount under this offering will not permit us to
completely implement our expansion strategy. It does, however, permit us to
begin implementation of this strategy. The more money we raise under this
offering and the faster it comes in, the more we can implement our business
strategy.
Our most significant milestone in this plan of operation is the raising
of not less than $250,000 from this offering. Unless we raise this minimum
amount of capital, we will be unable to implement our business plan in a timely
manner. What we do next will be dependent upon a variety of factors including
how much money we raise, whether we can identify acquisition targets, the
willingness of tanning salon owners to sell their businesses in exchange for our
common stock, whether we chose to enter new markets by opening our own new
tanning salons,
15
and the success of our marketing efforts.
We do not need to hire any additional employees to operate our existing
tanning salon. If we are successful in implementing our expansion plans, we will
retainer the necessary employees to permit us to operate additional tanning
salons.
Critical Accounting Policies
We prepare our financial statements in conformity with accounting
principals generally accepted in the United States. As such, we are required to
make certain estimates, judgments and assumptions that we believe are reasonable
based upon the information available to us. These estimates and assumptions
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the periods presented. The significant accounting policies that we believe are
the most critical to aid in fully understanding and evaluating our reported
financial results include the following:
Revenue recognition. Substantially all of our revenue is generated
through the delivery of tanning services and the tanning product sales. Revenue
is recognized when products are purchased. When individual tans and upgrades are
purchased, revenue is recognized when the service (or tan) is provided. If the
customer buys a tanning package or term membership that contains multiple
tanning sessions, the revenue is recognized in a straight-line basis as the
tanning service is provided. We account for the total number of tans yet to be
provided in the deferred revenue account in the current liability section of the
balance sheet. Tanning packages purchased after March 1, 2002 have an expiration
date of 12 months after the purchased date. Our experience is that most
customers use their tanning package prior to expiration and that as we build our
customer base, the balance of the deferred revenue account does not fluctuate
that much due to the renewing or repurchasing of tanning packages by our
customers.
Inventory Valuation. We review our inventory balances to determine if
inventories can be sold at amounts equal to or greater than their carrying
value. The review includes identification of slow-moving inventories, obsolete
inventories, and discontinued products or lines of products. The identification
process includes analysis of historical performance of the inventory and current
operational plans for the inventory as well as industry and customer-specific
trends. If our actual results differ from management expectations with respect
to the selling of our inventories at amounts equal to or greater than our
carrying amounts, we would be required to adjust our inventory values
accordingly.
Net operating loss carryforwards. We have not recognized the benefit in
our financial statements with respect to the approximately $238,000 net
operating loss carryforward for federal income tax purposes as of September 30,
2002. This benefit was not recognized due to the possibility that the net
operating loss carryforward would not be utilized, for various reasons,
including the potential that we might not have sufficient profits to use the
carryforward or that the carryforward may be limited as a result of changes in
our equity ownership. We intend to use this carryforward to offset our future
taxable income. If we were to use any of this net operating loss carryforward to
reduce our future taxable income and the Internal Revenue Service were to then
successfully assert that our carryforward is subject to limitation as a result
of capital transactions occurring in 2002 or otherwise, we may be liable for
back taxes, interest and, possibly, penalties prospectively.
Impairment of Long Lived Assets. We assess the impairment of long-lived
assets on an ongoing basis and whenever events or changes in circumstances
indicate that the carrying value may not be recoverable based upon an estimate
of future undiscounted cash flows. Factors we consider that could trigger an
impairment review include the following: (i) significant underperformance
relative to expected historical or projected future operating results; (ii)
significant changes in the manner of our use of the acquired assets or the
strategy for our overall business; (iii) significant negative industry or
economic trends; (iv) significant decline in our stock price for a sustained
period; and (v) our market capitalization relative to net book value.
When we determine that the carrying value of any long-lived asset may
not be recoverable based upon the existence of one or more of the above
indicators of impairment, we measure impairment based on the difference between
an asset's carrying value and an estimate of fair value, which may be determined
based upon quotes or a
16
projected discounted cash flow, using a discount rate determined by our
management to be commensurate with our cost of capital and the risk inherent in
our current business model, and other measures of fair value.
Results of Operations
Prior to the acquisition of the business of Altamonte Tan, Inc. on
February 28, 2002, our operations consisted mainly of the development of our
business plan and the analysis of the tanning industry. Results from fiscal year
2001 are exclusively the results of the business of Altamonte Tan, Inc. Results
for fiscal year 2002, are presented on a pro forma basis through September 30,
2002 as though we had acquired Altamonte Tan, Inc. on January 1, 2002.
We are in the early stage of operations and, as a result, the
relationships between revenue, cost of revenue, and operating expenses reflected
in the financial information included in this prospectus do not represent future
expected financial relationships. Much of the cost of revenue and operating
expenses reflected in our financial statements are relatively fixed costs. We
expect that these expenses will increase with the escalation of sales and
marketing activities and transaction volumes, but at a much slower rate of
growth than the corresponding revenue increase.
Nine Months Ended
September 30,
------------------------------
Year Ended 2001 2002/(1)/
December 31, 2001 (unaudited) (pro forma)
----------------- -------------- -------------
Tanning sales 84% 83% 84%
Product sales, net 16 17 16
----------------- -------------- -------------
Total revenue 100 100 100
Cost of revenue 94 88 92
----------------- -------------- -------------
Gross profit 6 12 8
----------------- -------------- -------------
Selling, general and administrative 31 30 284
Operating income (loss) (25) (18) (276)
----------------- -------------- -------------
Interest expense, net (6) (6) 2
Income (loss) before income taxes (31) (24) (274)
----------------- -------------- -------------
Provision (benefit) for income taxes 0 0 0
----------------- -------------- -------------
Net income (loss) (31)% (24)% (274)%
___________
(1) Pro forma results include results from operations for fiscal year 2002
as if Altamonte Tan, Inc. was acquired on January 1, 2001.
Nine Months Ended September 30, 2002 Compared to the Nine Months Ended September
30, 2001
Net Sales. Net sales increased by approximately $6,300 or 8%, to
$88,200 in 2002 from $81,900 in 2001. This increase was the result of the
purchase of new tanning equipment in March 2002. These capital expenditures
expanded our ability to provide more service to our customers by providing
higher quality tanning beds.
Gross Profit. Although our net sales increased by 6%, we did not
realize a corresponding increase in gross profit. Gross profit decreased
approximately $2,000, or 12%, to $7,400 in 2002 from $9,400 in 2001. This was
due to both the increase in the sales commissions we paid to our employees and
the increased hours of operation for our store during the same period. During
this period we doubled the commissions we pay to our employees for the sale of
tanning products and services from 5% to 10% and added an additional day each
week to our operations. The increase in our cost of revenue during 2002,
resulted in the aforementioned decrease in gross profit.
17
Selling, General and Administrative. Selling, general and
administrative expenses increased approximately $226,500 or 521% from $24,300 in
2001 to $250,800 in 2002. Approximately $200,000 of the increase in 2002 was due
to the signing of certain consulting contracts with Brannon Capital Corp.,
Varela Consulting Group, and Market Media, Inc. to assist with the strategic
planning, international sales and investor and public relations matters. In
addition, approximately $18,000 of this total increase was due to the employment
contract signed with our Glen Woods, our CEO. Other factors impacting the
increase was a $10,000 consulting agreement signed by the company with Bushido
Ventures, Inc. to assist with the organization and structuring of the company.
Our management team is not affiliated with any of these consultants.
Interest Expense, net. Interest expense, net decreased by approximately
$5,800, or 125%, to $1,200 in 2002 from $4,600 in 2001. This decrease reflected
the recapitalization of Altamonte Tan, Inc. with the purchase of its assets and
the assumption of only certain liabilities by us on February 28, 2002.
We anticipate experiencing greater sales in the first and second
quarters of the calendar year, as opposed to the third and fourth quarters of
the calendar year. The seasonality of our sales will be directly related to
weather patterns. The first and second quarters of the calendar year are usually
our strongest revenue producing quarters as customers begin to build their tan
after the winter for the upcoming spring and summer season. The third quarter of
the calendar year is usually the slowest due to the summer weather and customers
electing to achieve their tan at the beach or other non-indoor location. The
fourth quarter of the calendar year is slow at our location due to the warm
temperatures and sunshine received by the central Florida area, where our store
is located. Comparisons of our sales and operating results between different
quarters within a single year are, therefore, not necessarily indicators of our
future performance.
Although we have a limited operating history in connection with the
operation of our single tanning salon, we have no operating history with respect
to our plans for the expansion of our business to multiple locations. As we move
forward with our business plan, we expect our expenses to increase significantly
as we grow our business and enter into new markets through the opening of new
locations or through acquisitions. Accordingly, the comparison of the financial
data for the periods presented may not be a meaningful indicator of our future
performance and must be considered in light of our single tanning salon
operating history.
Looking forward at our business prospectus for the future, we have no
way of knowing if scientific research will find new or increased health risks to
indoor tanning. If such new or increased health risks are discovered, or if
media reports create concern or uncertainty in the public's perception of the
health risks associated with indoor tanning, our existing customers would likely
decide to reduce or eliminate their use of our products and services. New
customers would similarly be discouraged from patronizing our business. The
resulting reduction in revenue would have a material adversely affected on our
business and financial conditions.
Liquidity and Capital Resources
We had cash balances totaling $82,495 at September 30, 2002. Our
principal sources of funds have been cash generated from financing activities.
We believe that we will require $100,000 to fund our currently
anticipated requirements for ongoing operations and budgeted capital
expenditures for our existing business for the twelve-month period following the
closing of this offering. We currently intend to satisfy our long-term liquidity
requirements from cash flow from operations and with the proceeds from this
offering. However, our long-term liquidity requirements will depend on many
factors, including but not limited to, various risks associated with our
business that affect our sales levels and pricing, our ability to recover all of
our up-front costs related to future acquisitions, capital expenditures and
operating expense requirements and there can be no assurance that we will not
need to raise additional funds to satisfy them.
Cash flow from operations. We have been unable to generate significant
liquidity or cash flow from our current operations. We frequently change our
pricing structure to take into account our clients' fluctuating cash flows,
service and product needs. For example, we may reduce our prices of tanning
packages or offer certain
18
advantageous offers during our non-peak months of July thru December. We
generally experience an increased level of cash flow from operations in the
first six months of the calendar year as our clients prepare their tan for the
summer. We anticipate that cash flows from operations will be insufficient to
fund our business operations for the full year 2003.
Cash flow from investing activities. Net cash used in investing
activities is largely attributable to capital expenditures for tanning equipment
to support our internal expansion. We have no material commitments for capital
expenditures. However, we will continue to need computer and office equipment as
we expand our operations.
Cash flows from financing activities. Net cash provided by financing
activities was generated from a private placement of our common stock closed in
August 2002. The Company sold 2,500,000 shares of its common stock at a price of
$0.25 per share. Proceeds from the offering totaled $625,000 less expenses of
$62,500, for a net amount received of $562,500. Proceeds from this offering were
primarily used in the acquisition of Altamonte Tan along with costs associated
with this offering.
We believe the net proceeds from the sale of not less than 250,000
shares of our common stock offered hereby, together with the funds generated by
operations, will provide adequate cash to fund our anticipated cash needs over
at least the next 12 months and for the foreseeable future. Such needs may
include investments in new products and services, expansion of the internal
infrastructure to support future growth and acquisitions of complementary
businesses.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB or the
"Board") issued Statement of Financial Accounting Standards No. 141 ("SFAS No.
141"), Business Combinations, and No. 142 ("SFAS No. 142"), Goodwill and Other
Intangible Assets, collectively referred to as the "Standards". SFAS No. 141
supersedes Accounting Principles Board Opinion (APB) No. 16, Business
Combinations. The provisions of SFAS No. 141 (1) require that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001, (2) provide specific criteria for the initial recognition and
measurement of intangible assets apart from goodwill, and (3) require that
unamortized negative goodwill be written off immediately as an extraordinary
gain instead of being deferred and amortized. SFAS No. 141 also requires that
upon adoption of SFAS No. 142 the company reclassify the carrying amounts of
certain intangible assets into or out of goodwill, based on certain criteria.
SFAS No. 142 supersedes APB 17, Intangible Assets, and is effective for fiscal
years beginning after December 15, 2001. SFAS No. 142 primarily addresses the
accounting for goodwill and intangible assets subsequent to their initial
recognition. The provisions of SFAS No. 142 (1) prohibit the amortization of
goodwill and indefinite-lived intangible assets, (2) require that goodwill and
indefinite-lived intangibles assets be tested annually for impairment (and in
interim periods if certain events occur indicating that the carrying value of
goodwill and/or indefinite-lived intangible assets may be impaired), (3) require
that reporting units be identified for the purpose of assessing potential future
impairments of goodwill, and (4) remove the forty-year limitation on the
amortization period of intangible assets that have finite lives.
The provisions of the Standards also apply to equity-method investments
made both before and after June 30, 2001. SFAS No. 141 requires that the
unamortized deferred credit related to an excess over cost arising from an
investment that was accounted for using the equity method (equity-method
negative goodwill), and that was acquired before July 1, 2001, must be
written-off immediately and recognized as the cumulative effect of a change in
accounting principle. Equity-method negative goodwill arising from equity
investments made after June 30, 2001 must be written-off immediately and
recorded as an extraordinary gain, instead of being deferred and amortized. SFAS
No. 142 prohibits amortization of the excess of cost over the underlying equity
in the net assets of an equity-method investee that is recognized as goodwill.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." The adoption of this statement will have no impact on
the company's financial statements.
19
In August 2001, the FASB issued SFAS No. 144, "Accounting for
Impairment or Disposal of Long-Lived Assets." This statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and primarily addresses the development of a single
accounting model for long-lived assets to be disposed of. The company adopted
this statement on January 4, 2002.
In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities." This statement requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
These costs include lease termination costs and certain employee severance costs
that are associated with a restructuring, discontinued operation, plant closing,
or other exit or disposal activity. Previous accounting guidance was provided by
Emerging Issues Task Force Issue No. 94-3 "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity." Statement
146 replaces Issue 94-3. This statement is to be applied prospectively to exit
or disposal activities initiated after December 31, 2002. The company has not
determined the impact of its future adoption of this statement.
20
BUSINESS
Overview
We own and operate a single indoor tanning salon business in Altamonte
Springs, Florida that offers a full range of indoor tanning products and
services to our customers. The revenue from this single salon accounts for 100%
of our total revenues.
Universal Tanning Ventures, Inc., a Delaware Corporation was formed in
January of 2002 for the purpose of establishing a network of indoor tanning
salons. Through our wholly-owned subsidiary, UT Holdings, Inc., we acquired
substantially all of the assets and assumed certain liabilities of Altamonte
Tan, Inc. and have retained the services of its president and founder, Mr. Glen
Woods. Although the business that we acquired has been in operation since March
1997 and currently accounts for all of our revenue, our own independent
pre-acquisition revenues and operations have been de minimis. Our goal is to
become a total indoor tanning company that provides a full range of indoor
tanning products and services to consumers through a national network of indoor
tanning salons. We intend to offer tanning sessions, tanning packages, tanning
lotions and accelerators, and tanning accessories. Our tanning professionals
will offer educational information and tanning news to our customers.
We have analyzed information relevant to the indoor tanning industry
available from industry trade groups, the media and other available sources.
Based on our analysis of the available information, or experience operating our
tanning salon and our inability to identify any independent tanning salon
business with a national footprint, we believe that the full service tanning
salon market has not been fully addressed by other indoor tanning companies at
the current time. Using this information, we have developed a model for the sale
of tanning sessions, tanning packages, lotions and accelerators, and tanning
accessories. We intend to redefine how tanning products and services are offered
and supplied to consumers by creating a network of tanning salons that will
allow a member of our network to utilize their membership at any of our salons.
We intend to create this network of salons through both organic growth and the
acquisition of existing salons.
We expect to grow our revenue through (i) the increased sales of our
products and services in our existing salon; (ii) the opening and operation of
new salons; and (iii) the creation and sale of new member benefits, products and
services, including the member option of utilizing our products and services at
multiple locations.
Our Chief Executive Officer, Glen Woods, the founder and president of
Altamonte Tan, Inc. has five years experience in the operation of indoor tanning
facilities. We have signed Mr. Woods to an employment agreement to serve as our
Chief Executive Officer. The employment agreement is for a term of two years at
a base salary of $30,000 per year.
Our tanning salon and principal executive offices are located at 600 E.
Altamonte Drive, Unit 1050, Florida 32701, and our telephone number is (407)
260-9206; our mailing address is 4044 West Lake Mary Boulevard, #104-347, Lake
Mary, Florida 32746.
Summary of Altamonte Tan, Inc. Acquisition
Our president, Glen Woods, owned and operated Altamonte Tan, Inc., a single
indoor tanning salon business. We acquired the business of Altamonte Tan, Inc.
on February 28, 2002. Through our wholly owned subsidiary, UT Holdings, Inc., we
acquired substantially all of the assets and assumed certain liabilities of
Altamonte Tan, Inc. in exchange for $30,000. We have continued to operate the
business of Altamonte Tan, Inc. since our acquisition of its business under the
name "Universal Tanning." Although the business we acquired, Altamonte Tan,
Inc., has been in operation for 5 years prior to our acquisition, our own
independent pre-acquisition revenues and operations have been de minimis. The
revenue from this single salon accounts for 100% of our total revenues.
21
Industry Background
The indoor tanning industry is highly fragmented and very competitive.
According to the SunBusiness 2000 Report, there are over 20,000 indoor tanning
salons scattered throughout the United States. In 2000, the indoor tanning
industry was a more than $4.2 billion industry, and that number is expected to
grow in 2001. Last year, more than 27.5 million people tanned indoors in the
United States.
Over the past 10 years the industry has more than doubled, remaining one of
the strongest sectors of the fitness and recreation markets. More than 60
percent of the growth in the indoor tanning industry is coming from within the
industry itself, i.e., 60 percent of the new salons are current salon owners
either expanding or opening other locations. Overall, the number of tanners has
increased 5 percent from 27 million in 1999 to 28.3 million in 2000. The number
of commercial tanning locations continues to grow as well. In addition to the
estimated 20,000 locations that concentrate strictly on tanning, there are
another 12,000-15,000 locations such as health clubs, video stores and beauty
salons that offer indoor tanning and that number continues to grow annually.
The demographics of the average indoor tanner have remained fairly constant
over the industry's more than 30-year history. The majority of those who tan
continue to be in the 16 - 49 age group, 70 percent of which are women and 53
percent of which are women age 20-39. However, in talking with salon owners, one
of the fastest-growing segments of the indoor tanning industry is with older
tanners over the age of 55. According to surveys, more than 2.5 percent of
indoor tanning demographic now consists of tanners over the age of 55.
What is most significant about the indoor tanning industry's demographic of
tanners, is that it contains one of the highest service-based spending groups--a
combination of the older baby boomer generation, as well as the maturing
generation X demographic. According to American Demographics magazine, as baby
boomers, age 36-54, move into a new stage of life, it signals a fundamental
change that goes far beyond the demand for products and services that appeal to
the middle-aged. The projections suggest that as baby boomers leave youth
behind, many markets are likely to be substantially affected--including the
indoor tanning market. In general, baby boomers are highly focused on preserving
their appearance and spend 38.3 percent of their income trying to stay looking
young. One of the ways that they go about trying to stay young is by spending
money on fitness and recreation, of which the indoor tanning industry is a part.
These demographics have resulted in tanning salons offering more than just
tanning. Ancillary services offered by tanning salons include nails (26
percent), day spa services including massage, facials and aromatherapy (24
percent). Additionally, nearly 34 percent of salons surveyed sold active wear,
29 percent sold some type of refreshment and more than 39 percent sold
nutritional supplements.
More than 51 percent of salon owners say their salon revenue was $200,000
or more in 2000, and 59 percent say they expect to see their revenue increase in
2001 compared. Additionally, 78 percent of salon owners say they are either
expecting to expand their facilities or purchase additional tanning units within
the next year, while 22 percent are not anticipating expansion.
On the average 25 percent of average salon owners charge $5 or less per
tanning session with another 26 percent charge between $5.01-$7 and 49 percent
charge more than $7.01.
In tracking the different segments of the indoor tanning industry, the
fastest-growing market is the lotion and skincare market. Over the past nine
years, the lotion market has grown by more than 300 percent and there is no end
in sight. For salon owners, lotion sales can and should account for a large
portion of the salon's revenue. Forty-three percent of salons average 43 percent
of their monthly revenue from lotion sales; approximately 25 percent to 30
percent average 39 percent; 11 percent average more than 30 percent; and, 7
percent average less than 10 percent.
In 1992-1993, the typical tanning salon consisted of 6.7 tanning units and
had an average customer database of 1,673. Today, it is estimated that a salon
now has about 11 units and an average database of more than 2,200 customers.
Although the average tanning salon now has more than 11 units, salons with fewer
than four beds
22
still represent the largest component of the industry; this may be attributed to
growth within the beauty industry where one or two tanning beds often are added
to existing beauty salons. The percentage of salons with six to 10 units remains
around 42 percent, with 11-15 units at 12 percent and those with more than 16
units at more than 21 percent. We believe this industry growth and ownership
fragmentation represents a significant market opportunity for companies like
ours that have experienced and professional management, access to capital and a
business plan that includes the branding, standardization of business methods,
organic growth strategies and a goal of quickly acquiring a number of companies
to achieve first mover advantage in the industry.
The industry information set forth in this section is based upon the
SunBusiness 2000 Report published by Sun Ergoline.
Government Regulation
Both state and federal laws and regulations affect the indoor tanning
services industry. The principal federal laws regulating the manufacture of
indoor tanning devices are the Federal Food, Drug and Cosmetic Act administered
by the Federal Food and Drug Administration, the Public Health Service Act and
the Radiation Control for Health and Safety Act. Because of the potential of
injury; increased risks for skin cancer, eye damage, skin aging and allergic
reactions; and misuse of the tanning devices, the FDA has issued stringent rules
and regulations governing the manufacture and use of indoor tanning devices.
State regulation of the indoor tanning industry varies from state to
state. Many states have no laws or regulations regarding indoor tanning.
Approximately 28 states have either adopted or are in the process of adopting
laws and regulations dealing with the indoor tanning industry in their state.
State laws primarily regulate the health and safety aspects of tanning
operations rather than regulating the devices employed. Typical states require a
minimum age of the customer, use of protective eyewear during any tanning
session, maintenance of proper exposure distance and maximum exposure time as
recommended by the manufacturer and availability of suitable physical aids such
as handrails. Violation of the federal or state laws could result in criminal or
civil penalties.
The adoption or modification of laws or regulations applicable to the
indoor tanning industry could harm our business. New laws may impose burdens on
companies in the indoor tanning industry. The growth of the indoor tanning
industry may prompt calls for more stringent consumer protection laws.
The Market Opportunity
We have analyzed the indoor tanning industry and believe that it is
highly fragmented and very competitive. There are over 20,000 indoor tanning
salons located throughout the United States. Over the past 10 years the industry
has more than doubled, remaining one of the strongest sectors of the fitness and
recreation markets. We also believe that developments in the indoor tanning
industry are drawing more media attention to indoor tanning. This increased
exposure, new tanning equipment, and developments in tanning safety should
result in an increase in the market for indoor tanning related products and
services. Currently, we do not believe there is a company that has multiple
physical locations and the ability to offer the "total" tanning solution by
providing customers a single source with access to all indoor tanning related
products, services and information.
The Universal Tanning Solution
We believe this industry growth and ownership fragmentation represents
a significant market opportunity for companies like ours that have experienced
and professional management, access to capital and a business plan that includes
the branding, standardization of business methods, organic growth strategies and
a goal of quickly acquiring a number of companies to gain the advantage of being
the first company with a national footprint to establish itself in this
industry. We believe that to succeed, companies will need to provide extensive
product selection, detailed product information and other value added services
while aggregating all aspects of the tanning experience in multiple, easy to
access locations. We have analyzed the indoor tanning industry and have
developed a model for the sale of tanning sessions, tanning packages, lotions
and accelerators, and tanning accessories. As we implement our business plan,
our goal is to grow the business of our single tanning salon into the first,
national
23
indoor tanning company in the United States and, utilizing that network of
salons, become know as the "total" tanning solution through which customers can
access all indoor tanning related products, services and information.
Our Model
Our sales model is based on the following four assumptions regarding
customers' willingness to try or continue to use indoor tanning products and
services:
. The time it takes to get the tan they want;
. The cost of getting the tan they want;
. Extensive product selection; and
. Access to those products and services at multiple, easy to access
locations.
We have purchased a number of different tanning beds that can be
utilized by customers to obtain their desired tan in time periods that range
from 9 to 20 minutes.
We offer four different levels of tanning beds for our customers. The
levels of tanning beds are distinguished by their technology, mainly the ability
to offer deeper tans in fewer minutes in the tanning bed. The beds with the
newest technology are more expensive. By having different levels of tanning
equipment, we are able to offer tanning services to a broader selection of
customers.
We offer a broad and deep selection of lotions, accelerators and
accessories to our customers to complement their indoor tanning experience. The
types of lotions and accelerators used by the customer can also have a
significant impact on both the time to tan and the perceived quality of the tan.
The last factor in our model is multiple locations. We believe that
making it easy for customers to access our products and services, by offering
them at more than one location, will also give us a competitive advantage.
By making our products easy to access, quick to use and available at
different price points, we believe that our existing customers will continue to
use us and we will be able to attract new customers.
Strategy
Although our business currently consists of a single indoor tanning
salon, our goal is to become the first nationally branded total indoor tanning
company that provides a full range of indoor tanning products and services to
consumers throughout the United States. We intend to establish a network of
indoor tanning salons throughout the United States through which we can offer
tanning sessions, tanning packages, tanning lotions and accelerators, and
tanning accessories. Our tanning professionals expect to offer educational
information and tanning news to our customers. We intend to grow our business by
opening new locations and acquiring other operating salons.
Based on our operations of our single location, we intend to make
certain improvements in our operations that we believe will increase revenue and
are transferable to new locations as we open or acquire them. These include the
following:
. We have determined that our profit margins are better in
connection with the sale of products. We intend to try and take
advantage of these increased margins by trying to move our sales
mix more towards the sale of products.
. In January 2003, we introduced an electronic funds transfer, or
EFT, program that will give our customers the convenience of
having their membership payments made automatically through
electronic payments tied to their credit or debit card. We
believe this will decrease the rate of default on payments,
reduce the number of days we must wait for a payment to be made,
assist in evening out the seasonality of our sales and provide a
competitive advantage over those tanning stores that do not
provide this option.
24
. We have developed a proprietary, custom software system that is
designed to help increase our operational efficiency and revenue
by providing management with detailed reports on all operational
aspects of the business including without limitation product
sales, bed usage, and customer demographic information.
Based on our operations of our single location, the majority of
expenses such as rent, payroll, utilities and insurance are fixed in nature.
Once expenses are set for a given salon, it is difficult to cut costs by a
significant amount. As we expand locations nationally, increased purchasing
power should reduce certain expenses and increased marketing exposure should
drive more traffic to our salons for less money, thereby increasing profits.
Based on operations of our single store, as we implement our expansion
strategy and grow the number of our locations, we expect that our expenses will
increase due to acquisition costs associated with the expansion of operations.
We anticipate that our legal and professional and accounting fees will rise
significantly based on the type, size and complexity of any acquisition of other
operating tanning salons. If we are unable to control the costs of acquiring
other tanning salons, our ability to grow through acquisition could be reduced
significantly.
We are looking for appropriate acquisition targets to grow the number
of salon locations we own and operate. We do not currently have any agreements
or understandings to acquire any other tanning businesses. We will consider the
following factors, among others, in targeting a potential business acquisition:
. Financial condition and results of operation of the target
business;
. The location of the target business;
. Growth potential and projected financial performance of the
target business;
. Experience and skill of management and availability of additional
personnel of the target business;
. Capital requirements of the target business;
. Target business' willingness to be acquired in exchange for our
common stock;
. Competitive position of the target business; and
. Costs associated with effecting the acquisition of the target
business.
The foregoing criteria are not listed in any particular order and not intended
to be exhaustive. Any evaluation relating to the merits of a particular
acquisition will be based, to the extent relevant, on the above factors as well
as other considerations deemed relevant by us in connection with any acquisition
we conclude.
We also intend to implement a membership program that will allow the
members to use the tanning services purchased at any of our network salons. We
expect this strategy to allow us to grow our revenue through (i) the increased
sales of our products and services in our existing salon; (ii) the opening and
operation of new salons; and (iii) the creation and sale of new member benefits,
products and services, including the member option of utilizing our products and
services at multiple locations.
We believe that developments in the indoor tanning industry are drawing
more media attention to indoor tanning. This increased exposure, new tanning
equipment, and developments in tanning safety should result in an increase in
the market for indoor tanning related products and services. However, the indoor
tanning industry is highly fragmented. We believe that to succeed, companies
will need to provide extensive product selection, detailed product information
and other value added services while aggregating all aspects of the tanning
experience in multiple, easy to access locations. Currently, we do not believe
there is a company that offers the "total" tanning solution by providing
customers a single source with access to all indoor tanning related products,
services and information. Our strategy is to become that "single source" by
utilizing online information and services, multiple physical locations and an
interconnected network of salons to become the total tanning company and a
leading provider of tanning related goods and services.
25
Our Products and Services
The Tanning Process. Whether you tan outside in the sun or at an indoor
tanning salon, the tanning process is the same. Our products and services are
intended to enhance the quality of the tanning experience we offer at the salon.
Tanning occurs in the top layer of the skin, or epidermis. Specific cells in the
germinative layer, melanocytes, are exposed to small amounts of Ultraviolet B
rays, triggering melanin production. As the tiny melanin platelets migrate
upward, they are exposed to Ultraviolet A rays, the primary Ultraviolet
radiation produced by tanning lamps. The exposure to UVA oxidizes the melanin
the skin has produced and turns it brown. This darkening process gives us our
tan.
All tans fade over time as a result of cells in the epidermis'
germinative layer constantly reproducing and pushing older cells upward toward
the horny layer (dead epidermis), where they are sloughed off in about one
month. As your skin replaces its cells, the cells laden with melanin are
removed. To remain tan, the process must be regularly continued with the new
cells.
Products. Our products consist of approximately 90% lotions and
remaining 10% is stickers, drinks, sunglasses and protective eyewear. We carry
approximately 80-100 different lotion products ranging from sample packets to
the highest quality maximizing and accelerating lotions offered by such
companies as California Tan, John Abate International, Supre and the Power Tan
Corporation. Prices range on our lotion products from $4 for sample products to
$55 for premier lotion products.
Our primary product offerings include:
. Tanning Accelerators. Accelerators are lotions that contain
the amino acid tyrosine. Makers of these products believe
that the tyrosine stimulates and increases melanin
formation, thereby accelerating the natural tanning process.
. Bronzers. Cosmetic bronzers produce immediate effects that
can be easily removed with soap and water. Bronzers are
available as powders, creams, and lotions. These products
are essentially a form of make-up, since the tint only lasts
until it is washed off.
. Tanning Lotions and Sprays. Perhaps the most effective
sunless tanning products are lotions and sprays containing
dihydroxyacetone (DHA) as the active ingredient. DHA is a
colorless sugar that interacts with the dead cells located
in the upper layer of the epidermis. As the sugar interacts
with the dead skin cells, a color change occurs. This change
usually lasts about five to seven days from the initial
application.
Services. Our services are comprised of single tanning sessions,
multi-session tanning packages, term memberships and upgrades. Single tanning
sessions can be purchased on our one of our 5 different types of tanning beds at
prices ranging from $8 to $16. Our multi-session packages consist of the
purchase of 5 or 10 tans on any one of our different types of beds. On each of
the beds, we offer term memberships of 1 month. With each term membership, a
customer can tan on that specific bed an unlimited number of times over the
course of a month. Due to the wide variety of tanning choices, we offer upgrade
packages so that clients can increase their tanning experience with an upgrade
package to a more powerful tanning bed.
Equipment. Our tanning equipment consists of low and medium pressure
units. Our beds are manufactured by Sonnenbraune, a worldwide leader in quality,
German engineered tanning equipment. We provide 4 levels of Sonnenbraune
equipment, ranging from the 732, a twenty-minute exposure unit, to medium
pressure VHR (Very High Reflective) units. Our flagship bed is the Diva7, a
nine-minute VHR unit and Sonnenbraune's premier tanning unit. Our vertical
tanning booth is a 60 lamp VHR unit manufactured by Suncapsule. It is a 9 minute
booth and at the top of its class among high performance tanning equipment.
26
Sales and Marketing
Our marketing strategy is designed to attract consumers to purchase
indoor tanning products and services, convert browsers to buyers, meet or exceed
customer expectations, drive loyalty and repeat purchases while building
enduring brand equity. In order to implement this strategy, we intend to execute
an integrated marketing campaign that includes the following:
. Advertising
Our advertising will be designed to build brand equity, create
awareness, and generate initial purchases of our products and services. We
expect to use a mix of traditional print media, direct mail, billboards, radio
and online banners, text links and e-mail newsletters.
. Event Sponsorship
We expect to sponsor events that are designed to build brand awareness
and build our customer base. We intend to sponsor events that support cross
marketing to potential customers that fit the demographic profile for indoor
tanners.
. Promotions
We intend to selectively utilize promotional offers to further our
brand building efforts. This includes promotions such as on-site merchandising
of product we have been able to buy in bulk from vendors at reduced prices that
we can sell to our customers at a discount.
Competition
We are subject to extensive competition from traditional tanning
salons, beauty salons with indoor tanning units and other retail stores with
tanning beds. We believe that indoor tanners make their purchase decisions based
on price, quality and type of equipment, word of mouth, and advertising. Some of
our competitors are larger than us and have substantially greater financial and
marketing resources. In addition, some of our competitors may be able to secure
products from vendors on more favorable terms, offer a greater product
selection, and adopt more aggressive pricing policies than we can.
We believe that we can compete successfully against these other
companies based upon:
. the performance and reliability of our products and services;
. the variety of products and services we offer;
. the price of our products and services; and
. the effectiveness of our customer service and support efforts.
We want to offer a competitive source for tanning products and
services. There can be no assurance that we will be able to obtain the quantity,
selection or brand quality of items that we believe is necessary.
Employees
We currently have 3 employees, 2 of who are part-time sales personnel
and 1 who is general, administrative and executive management personnel. None of
the employees are covered by a collective bargaining agreement and our
management considers relations with our employees to be good.
Property
We currently operate a single tanning saloon. This saloon occupies
approximately 1,700 square feet of retail space in Altamonte Springs, Florida,
and also serves as our executive offices. Our rent for this location
27
is approximately $3,459 per month and our five (5) year lease expires on
February 28, 2007. Our personal property consists of computer equipment, 12
tanning beds, furniture and inventory.
Legal Proceedings
We are not a party to any pending legal proceeding or litigation. In
addition, none of our property is the subject of a pending legal proceeding. We
are not aware of any legal proceedings against the company or our property
contemplated by any governmental authority.
28
MANAGEMENT
Executive Officers and Directors
The names of our executive officers and directors, their ages as of
November 1, 2002, and the positions currently held by each are as follows:
Name Age Position
---- --- --------
Glen Woods ................ 47 President, Chief Executive Officer,
Principal Financial Officer and
Director
Dyron M. Watford .......... 26 Principal Accounting Officer and
Director
Glen Woods has served as our President, Chief Executive Officer, Principal
Financial Officer and a Director since the acquisition of Altamonte Tan, Inc.
on February 28, 2002. From March 1997 to February 2002, Mr. Woods served as the
president of Altamonte Tan, Inc.
Dyron M. Watford, a Certified Public Accountant, was appointed to serve as
our Principal Accounting Officer and was elected to serve as a director of the
company in November 2002. In May 2001, Mr. Watford was elected and still serves
as the sole officer and director of Frontier Educational Systems, Inc., of which
he is the founder and sole stockholder. Frontier Educational Systems is a
development stage company that intends to provide online tutoring services to
the secondary educational market through the use of highly qualified tutors.
Since August 2000, Mr. Watford has served as the president, sole stockholder and
director of Sirus Capital Corp, Inc., a consulting company providing financial
services to existing and emerging private and public companies. From December
1998 to August 2000, Mr. Watford was an auditor for Arthur Andersen, LLP. Mr.
Watford's completed his Master of Business Administration degree from the
University of Central Florida in December 1998. From 1997 to 1998, Mr. Watford
worked at the Certified Public Accounting firm of DeArrigoitia & Company as a
staff accountant.
Directors' Compensation
Currently there is no compensation package for our board. We expect to
create a compensation package for our board members during the next 12 months.
We currently do not have any employee stock option or other incentive
plans.
Neither Mr. Mr. Woods nor Mr. Watford has any prior experience as an
officer or director of any publicly traded or reporting company.
Board of Directors and Committees
The directors are elected to one-year terms. Each director holds office
until the expiration of the director's term, until the director's successor has
been duly elected and qualified or until the earlier of such director's
resignation, removal or death. Our board of directors does not have an audit or
any other committee.
29
Executive Compensation
The following table shows the cash compensation paid by us, as well as
certain other compensation paid or accrued, during the period ended September
30, 2002 to our Chief Executive Officer.
Summary Compensation Table
Long-Term
Compensation
-----------------
Shares of
Annual Compensation/(1)/ Common Stock
Other Annual Underlying
Name and Position Year Salary ($) Compensation ($) Options (#)
- ----------------- ---- ---------- ------------------ -----------------
Glen Woods, CEO 2002 $17,500 $ - -
- --------------
/1)/ Mr. Woods employment commenced on February 28, 2002. Therefore the period
ended September 30, 2002, only includes seven months. The amounts reflected
in the above table do not include any amounts for perquisites and other
personal benefits extended to such executive officer. The aggregate amount
of such compensation for such officer is less than 10% of the total annual
salary and bonus.
Employment Agreements
We entered into a two-year employment agreement, effective February 28,
2002, with Glen Woods. Pursuant to the agreement, an annual base salary of
$30,000 is paid to Mr. Woods. Mr. Woods is not entitled to an annual base salary
increase. Mr. Woods' employment agreement contains confidentiality provisions
and also prohibits him from competing with us during the term of the agreement
and for one year thereafter.
Limitation on Liability and Indemnification Matters
Our By-laws provide that we shall indemnify each Director and such of
the company's officers, employees and agents as the Board of Directors shall
determine from time to time to the fullest extent provided by the Delaware
General Corporation Law.
The statute does not affect a director's responsibilities under any
other law, such as the federal securities laws or state or federal environmental
laws.
At present, there is no pending litigation or proceeding involving any
of our directors, officers, associates or other agents for which indemnification
is being sought. We are also not aware of any threatened litigation that may
result in claims for indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons under
the above provisions, or otherwise, we have been advised that, in the opinion of
the SEC, indemnification is against public policy as expressed in the Securities
Act, and is unenforceable.
30
PRINCIPAL STOCKHOLDERS
The following table presents information known to us, as of the date of
this prospectus and as adjusted to reflect the sale by us of 1,000,000 shares of
common stock offered under this prospectus, relating to the beneficial ownership
of common stock by:
. each person who is known by us to be the beneficial holder of more
than 5% of our outstanding common stock;
. each of our named executive officers and directors; and
. our directors and executive officers as a group.
We believe that all persons named in the table have sole voting and
investment power with respect to all shares beneficially owned by them, except
as noted. The address of each stockholder listed in the table is care of
Universal Tanning Ventures, Inc., 4044 W. Lake Mary Boulevard, #104-347, Lake
Mary, Florida 32746.
Percentage ownership in the following table is based on 7,500,000
shares of common stock outstanding as of the date of this prospectus, and as
adjusted to reflect the sale of 1,000,000 newly issued shares of common stock
offered under this prospectus. A person is deemed to be the beneficial owner of
securities that can be acquired by that person within 60 days from the date of
this prospectus upon the exercise of options, warrants or convertible
securities. Each beneficial owner's percentage ownership is determined by
dividing the number of shares beneficially owned by that person by the base
number of outstanding shares, increased to reflect the shares underlying
options, warrants or other convertible securities included in that person's
holdings, but not those underlying shares held by any other person.
Percentage of Shares
Number of Beneficially Owned
Shares of Common ------------------------------
Stock Beneficially Before After
Name of Beneficial Owner Owned Offering Offering
------------------------------------ -------------------- -------------- --------------
Glen Woods 2,250,000 30.0% 26.5%
Patrick Abraham 750,000 10.0% 8.8%
Dwain Brannon 750,000 10.0% 8.8%
Charissa Ioppolo 625,000 8.3% 7.4%
Dyron M. Watford 625,000 8.3% 7.4%
All directors and officers (2 2,875,000 38.3% 33.9%
persons)
31
CERTAIN TRANSACTIONS
Our founders, Glen Woods, Patrick Abraham, Dwain Brannon, Charissa
Ioppolo and Dyron Watford organized us on January 4, 2002. On that date we
issued an aggregate total of 5,000,000 shares of common stock to them in
consideration of the furnishing of initial capitalization of $500. Each of our
founders can therefore be considered to be promoter.
On February 28, 2002, we acquired the assets and assumed certain
liabilities of Altamonte Tan, Inc., which was wholly owned by Glen Woods, our
president and CEO in exchange for $30,000.
Since the inception of the company in January 2002, the company has
employed various consultants to advise the company in matters related to the
marketing of its products, the identification of investors and the
implementation of short and long term strategic planning. The following is a
brief description of the consulting agreements entered into during 2002.
Varela Consulting Group. We entered into a 6-month agreement in July
2002 with Varela Consulting Group. Varela represents us in regard to the
potential sale of our products and services to business contacts and potential
customers worldwide, particularly in Central and South America. Compensation
paid to Varela for their services totaled $100,000 and is being amortized over
the life of the contract on a straight-line basis. The remaining unamortized
portion of the contract is accounted for on the balance sheet under the caption
Prepaid consulting fees. Varela is wholly-owned by Angela Abraham. Her husband,
Patrick Abraham, is a founding stockholder of Universal Tanning Ventures, Inc.
Brannon Capital Corp. We entered into a 12-month agreement in March
2002 with Brannon Capital Corp. Brannon Capital advises us in the implementation
of short and long-term strategic planning, recruitment and employment of key
executives consistent with the expansion of operations and advising the company
concerning matters related to the management and organization of the company.
Compensation paid to Brannon Capital for their services totaled $100,000 and is
being amortized over the life of the contract on a straight-line basis. The
remaining unamortized portion of the contract is accounted for on the balance
sheet under the caption Prepaid consulting fees. The sole shareholder of Brannon
Capital Corp, Dwain Brannon, is a founding stockholder of Universal Tanning
Ventures, Inc.
Market Media, Inc. We entered into an agreement in July 2002 with
Market Media, Inc. Market Media will advise us in investor and public relations
matters as it relates to this offering. As the consulting services relate to
this offering, the $100,000 in consulting fees paid to Market Media have been
accounted for as Deferred offering costs and will be offset against additional
paid in capital at the completion of this offering. Neither Market Media nor any
of its officers, directors or stockholders are affiliates of Universal Tanning
Ventures, Inc.
Bushido Ventures, Inc. We entered into an agreement in March 2002 with
Bushido Ventures, Inc. Bushido Ventures has provided advice to us on the
organization and structuring of the company, the implementation of our financial
and accounting systems and controls and the retention of appropriate
professional advisors. Compensation paid to Bushido Venture for their services
totaled $10,000. Charissa Ioppolo is president and shareholder of Bushido
Ventures, and is a founding stockholder of Universal Tanning Ventures, Inc.
32
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
There has been no trading market for our common stock. If a trading
market does in fact develop for the common stock offered in this Prospectus,
there can be no assurance that it will be sustained. To the extent that a
trading market develops at all, it will most likely be the NASD OTCBB. The
ability of a NASD member firm to continue to quote prices for trading of our
common stock on the NASD OTCBB will be conditioned upon our meeting and
maintaining the criteria for continued listing. If we are unable to satisfy the
exchange maintenance criteria in the future, our common stock may be deleted
from the OTCBB. In such event, trading, if any, in our common stock, would
thereafter be conducted in the over-the-counter market in the so-called "pink
sheets". As a consequence of such deletion, an investor would likely find it
more difficult to dispose of, or to obtain quotations as to, the price of our
common stock.
There can be no assurance that a trading market will develop. To date,
neither we nor anyone acting on our behalf has taken any affirmative steps to
retain or encourage any broker/dealer to act as a market maker for our common
stock. Further, there have been no discussions or understandings, preliminary or
otherwise, between us or anyone acting on our behalf and any market maker
regarding the participation of any such market maker in the future trading
market, if any, for our common stock.
The common stock is being offered at $1.00 per share of common stock.
Our common stock will be subject to the penny stock rules and purchasers of the
common stock may find it more difficult to sell their shares. Securities deemed
"penny stocks" are subject to additional informational requirements in
connection with any trades made in the penny stock. The SEC has adopted rules
that regulate broker-dealer practices in connection with transactions in penny
stocks. Penny stocks generally are equity securities with a price of less than
$5.00, other than securities registered on national securities exchanges or
quoted on the Nasdaq system, provided that current price and volume information
with respect to transactions in such securities is provided by the exchange or
system. The penny stock rules require a broker-dealer, prior to a transaction in
a penny stock not otherwise exempt from those rules, to deliver a standardized
risk disclosure document prepared by the SEC, which specifies information about
penny stocks and the nature and significance of risks of the penny stock market.
The broker-dealer also must provide the customer with bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction, and monthly account statements showing the market value of
each penny stock held in the customer's account. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from those rules the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the trading activity in the secondary market for
a stock that becomes subject to the penny stock rules.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common equity. The 7,500,000 shares of our common stock
currently outstanding are restricted securities as that term is defined in the
Securities Act of 1933, as amended. As of the date of this Prospectus, there are
no shares of our common stock that would be eligible for sale in accordance with
Rule 144. All of the currently outstanding shares of our common stock are
"restricted securities" as that term is defined under Rule 144, in that those
shares were issued in private transactions not involving a public offering and
may not be sold in the absence of registration other than in accordance with
Rule 144, 144(k) or 701 promulgated under the Securities Act of 1933, as
amended, or another exemption from registration.
Sales of substantial amounts of our common stock under Rule 144, this
Prospectus or otherwise could adversely affect the prevailing market price of
our common stock and could impair our ability to raise capital through the
future sale of our securities.
There are 96 holders of record of our common stock. We have not
declared any dividends since inception, and do not currently intend to pay cash
dividends on our common stock in the foreseeable future. See "Description of
Capital Stock-Dividends."
33
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 10,000,000 shares of common stock, $0.0001
par value per share, of which 7,500,000 were issued and outstanding as of
September 30, 2002. Each outstanding share of common stock entitles the holder
to one vote, either in person or by proxy, on all matters that may be voted upon
by the owners of those shares at meetings of the stockholders.
The holders of common stock (i) have equal rights to dividends from
funds legally available for the payment of dividends, when, as and if declared
by our board of directors; (ii) are entitled to share ratably in all of our
assets available for distribution to holders of common stock upon liquidation,
dissolution or winding up our affairs; (iii) do not have preemptive,
subscription or conversion rights, and (iv) are entitled to one non-cumulative
vote per share on all matters which stockholders may vote at all meetings of
stockholders.
The owners of our common stock do not have cumulative voting rights,
which means that the holders of more than 50% of the outstanding common stock,
voting for the election of directors, can elect all of our directors if they so
choose and, in that event, the holders of the remaining common stock will not be
able to elect any of our directors.
Each share of common stock is entitled to share pro rata in dividends
and distributions with respect to the common stock when, as and if declared by
the board of directors from funds legally available for that purpose. No holder
of any shares of common stock has any pre-emptive right to subscribe for any of
our securities. Upon dissolution, liquidation or winding up of our company, the
assets will be divided pro rata on a share for share basis among holders of the
shares of common stock after any required distribution to the holders of
preferred stock, if any. All shares of common stock outstanding are fully paid
and nonassessable.
Each stockholder of common stock is entitled to one vote per share with
respect to all matters that are required by law to be submitted to stockholders.
Dividends
We have not declared any dividends since inception, and have no present
intention of paying any cash dividends on our shares in the foreseeable future.
The payment of dividends, if any, in the future, rests within the discretion of
our board of directors and will depend, among other things, upon our earnings,
our capital requirements and our financial condition, as well as other relevant
facts.
Transfer Agent and Registrar
Currently, we are acting as our own transfer agent and registrar for
our common stock.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
We cannot predict the effect, if any, that market sales of shares of our common
stock or the availability of shares of our common stock for sale will have on
the market price of our common stock prevailing from time to time. Nevertheless,
sales of substantial amounts of our common stock in the public market could
adversely affect the market price of our common stock and could impair our
future ability to raise capital through the sale of our equity securities.
On completion of this offering, assuming we sell the maximum number of
shares offered under this prospectus, we have 8,500,000 shares of common stock
outstanding. Of these shares the 1,000,000 shares of common stock sold in this
offering will be freely transferable by persons other than "affiliates," as that
term is defined under the Securities Act, without restriction or further
registration.
The remaining 7,500,000 outstanding shares of common stock are
"restricted securities" within the meaning of Rule 144 under the Securities Act
of 1933, as amended, and may not be sold in the absence of registration unless
an exemption from registration is available, including the exemption contained
in Rule 144.
34
Rule 144
In general, under Rule 144, a person who has owned shares of our common
stock for at least one year would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
. 1% of the number of shares of common stock then outstanding; or
. The average weekly trading volume of the common stock on the OTCBB
during the four calendar weeks preceding the filing of a notice on Form
144 with respect to that sale.
Sales under Rule 144 are also governed by manner of sale provisions and
notice requirements and current public information about us must be available.
In addition, a person who is deemed not to have been our affiliate at
any time during the three months preceding a sale by him or her and who has
beneficially owned his or her shares for at least two years, may sell the shares
in the public market under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, notice requirements, or the availability of current
information we refer to above. No outstanding shares will qualify for this
exemption either immediately or within 30 days after the offering.
We are unable to estimate the number of shares that may be sold in the
future by the existing holders of shares of our common stock, if any, that sales
of shares of common stock by such persons will have on the market price of the
common stock prevailing from time to time. Sales of substantial amounts of
common stock by such persons could have a depressive effect on the market price
of our securities in any market that may develop for our shares.
PLAN OF DISTRIBUTION
The shares of common stock shall be offered on a self-underwritten
basis, which means that it does not involve the participation of an underwriter
or broker, in the States of Georgia and Colorado and in jurisdictions outside
the U.S. The common stock is not being offered in any state or jurisdiction
where the offer is not permitted. The prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state or jurisdiction where the offer or sale is not permitted.
The offering price is $1.00 per share. There is no minimum number of
shares that we have to sell. There will be no escrow account. All money received
from the offering will be immediately used by us and there will be no refunds.
The offering will be for a period of up to 90 days from the effective date but
may be extended for an additional 30 days if we choose to do so.
There is no minimum number of shares that must be sold in this
offering. Any money we receive will be immediately appropriated by us for the
uses set forth in the Use of Proceeds section of this prospectus. No funds will
be placed in an escrow account during the offering period and no money will be
returned once the subscription has been accepted by us.
We will sell the shares in this offering through Glen Woods and Dyron
Watford, our officers. Mr. Woods and Mr. Watford will contact individuals and
corporations with whom they have an existing or past pre-existing business or
personal relationship and will attempt to sell them our common stock. Mr. Woods
and Mr. Watford will receive no commission from the sale of any shares. Mr.
Woods and Mr. Watford will not register as broker-dealers pursuant to Section 15
of the Securities Exchange Act of 1934 in reliance upon Rule 3a4-1. Rule 3a4-1
sets forth those conditions under which a person associated with an issuer may
participate in the offering of the issuer's securities and not be deemed to be a
broker-dealer. The conditions are that:
1. The person is not subject to a statutory disqualification, as that
term is defined in Section 3(a)(39) of the Act, at the time of his
participation; and,
35
2. The person is not compensated in connection with his participation
by the payment of commissions or other remuneration based either directly or
indirectly on transactions in securities; and
3. The person is not at the time of their participation, an
associated person of a broker-dealer; and,
4. The person meets the conditions of Paragraph (a)(4)(ii) of Rule
3a4-1 of the Exchange Act, in that he (A) primarily performs, or is intended
primarily to perform at the end of the offering, substantial duties for or on
behalf of the Issuer otherwise than in connection with transactions in
securities; and (B) is not a broker or dealer, or an associated person of a
broker or dealer, within the preceding twelve (12) months; and (C) do not
participate in selling and offering of securities for any Issuer more than once
every twelve (12) months other than in reliance on Paragraphs (a)(4)(i) or
(a)(4)(iii).
Mr. Woods and Mr. Watford have not sold and will not sell our
securities during the periods described, except pursuant to this offering. Mr.
Woods and Mr. Watford are not subject to disqualification, are not being
compensated, and are not associated with a broker-dealer. Mr. Woods and Mr.
Watford are and will continue to be our officers and directors at the end of the
offering and have not been during the last twelve months and are currently not
broker/dealers or associated with broker/dealers. Mr. Woods and Mr. Watford have
not during the last twelve months and will not in the next twelve months offer
or sell securities for another corporation. Mr. Woods and Mr. Watford intend to
contact persons with whom they have a past or have a current personal or
business relationship and solicit them to invest in this offering.
Only after the SEC declares our registration statement effective, do we
intend to advertise, through tombstones, and hold investment meetings in various
states where the offering will be registered. We will not utilize the Internet
to advertise our offering. We will also distribute the prospectus to potential
investors at the meetings and to our friends and relatives who are interested in
us and in a possible investment in the offering.
Procedures for Subscribing
If you decide to subscribe for any shares in this offering, you must:
. execute and deliver a subscription agreement; and
. deliver a check or certified funds to us for acceptance or
rejection.
All checks for subscriptions must be made payable to "UNIVERSAL TANNING
VENTURES, INC."
Right to Reject Subscriptions
We have the right to accept or reject subscriptions in whole or in
part, for any reason or for no reason. All monies from rejected subscriptions
will be returned immediately by us to the subscriber, without interest or
deductions. Subscriptions for securities will be accepted or rejected within 72
hours after we receive them.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
us by Greenberg Traurig, P.A., Orlando, Florida. Charissa Ioppolo, the wife of
Frank S. Ioppolo, Jr., a shareholder of Greenberg Traurig, P.A., owns
beneficially and of record an aggregate of 625,000 shares of common stock.
EXPERTS
The financial statements of Universal Tanning Ventures, Inc. and
Subsidiary, at September 30, 2002, and for the nine months then ended and the
financial statements of Altamonte Tan, Inc., at December 31, 2001, and for the
year then ended, appearing in this prospectus have been audited by Tedder,
James, Worden & Associates, P.A.
36
independent auditors, as set forth in their report thereon appearing elsewhere
in this prospectus, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission, a
registration statement on Form SB-2, including exhibits and schedules thereto,
under the Securities Act with respect to the units to be sold in this offering.
This prospectus, which constitutes a part of the registration statement, does
not contain all the information set forth in the registration statement and the
exhibits filed with it, portions of which have been omitted as permitted by the
rules and regulations of the SEC. For further information with respect to us and
the shares to be sold in this offering, reference is made to the registration
statement and to the exhibits filed with it. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to, are not necessarily complete. In each instance we refer you to the
copy of the contracts, agreements and/or other documents filed as exhibits to
the registration statement, and these statements are deemed qualified in their
entirety by reference to the contract or document.
Upon completion of this offering, we will become subject to the
informational and periodic reporting requirements of the Securities Exchange Act
of 1934, as amended, and will, therefore, be required to file such information
and reports with the SEC.
You may inspect, without charge, all or any portion of the registration
statement or any reports, statements or other information we filed at the SEC's
public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of these documents may also be obtained from the
SEC's Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 upon payment of the prescribed fees. You may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
In addition, registration statements and other filings made with the
SEC through its electronic data gathering, analysis and retrieval systems are
publicly available through the SEC's site located at www.sec.gov. The
registration statement, including all exhibits and schedules and amendments, has
been filed with the commission through the Electronic Data Gathering, Analysis
and Retrieval system.
37
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Universal Tanning Ventures, Inc.
And Subsidiary
ALTAMONTE TAN, INC.
Independent Auditors' Report ................................................................. F-2
Balance Sheet as of December 31, 2001 ........................................................ F-3
Statement of Operations for the year ended December 31, 2001 ................................. F-4
Statement of Shareholders' Deficit for the year ended December 31, 2001 ...................... F-5
Statement of Cash Flows for the year ended December 31, 2001 ................................. F-6
Notes to Financial Statements ................................................................ F-7
UNIVERSAL TANNING VENTURES, INC. AND SUBSIDIARY
Independent Auditors' Report ................................................................. F-11
Consolidated Balance Sheet as of September 30, 2002 .......................................... F-12
Consolidated Statement of Operations for the nine months ended September 30, 2002 ............ F-13
Consolidated Statement of Stockholders' Equity for the nine months ended September 30, 2002 .. F-14
Consolidated Statement of Cash Flows for the nine months ended September 30, 2002 ............ F-15
Notes to Consolidated Financial Statements ................................................... F-16
UNIVERSAL TANNING VENTURES, INC. UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Combined Financial Statements ............................ F-22
Unaudited Pro Forma Combined Statement of Operations ......................................... F-23
F-1
Independent Auditors' Report
To the Board of Directors and Shareholder of
Altamonte Tan, Inc.:
We have audited the accompanying balance sheet of Altamonte Tan, Inc. (the
"Company") as of December 31, 2001, and the related statements of operations,
shareholders' deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Altamonte Tan, Inc. as of
December 31, 2001, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.
As more fully described in Note 6, the Company sold its assets and ceased
operations on February 28, 2002.
/s/ Tedder, James, Worden & Associates, P.A.
Orlando, Florida
November 18, 2002
F-2
Altamonte Tan, Inc.
Balance Sheet
December 31, 2001
Assets
------
Current assets:
Cash and cash equivalents $ 9,231
Inventories 2,773
Other current assets 324
-------------
Total current assets 12,328
Property and equipment, net 37,467
Intangible assets, net 3,228
Deposits 500
-------------
Total assets $ 53,523
=============
Liabilities and Shareholders' Deficit
-------------------------------------
Current liabilities:
Accounts payable $ 10,067
Deferred revenue 12,626
Accrued expenses 2,204
Advances from shareholder 48,671
Current maturities of capital lease obligations 6,114
-------------
Total current liabilities 79,682
Capital lease obligation, long term 3,238
Total liabilities 82,920
-------------
Shareholders' deficit
Common stock, $1.00 par value, 500 shares authorized,
issued and outstanding 500
Additional paid-in capital 215,148
Accumulated deficit (245,045)
-------------
Total shareholders' deficit (29,397)
-------------
Total liabilities and shareholders' equity $ 53,523
=============
See accompanying notes to financial statements.
F-3
Altamonte Tan, Inc.
Statement of Operations
For the year ended December 31, 2001
Revenue:
Tanning service $ 87,413
Product sales, net of returns and allowances 17,117
-------------
Total revenue 104,530
Cost of revenue
Tanning services 87,829
Product sales 9,989
-------------
Total cost of revenue 97,818
-------------
Gross profit 6,712
Selling, general and administrative expenses 32,638
-------------
Loss from operations (25,926)
Interest expense (6,180)
-------------
Net loss $ (32,106)
=============
Weighted average common shares outstanding 500
=============
Basic and diluted loss per share $ (64.21)
=============
See accompanying notes to financial statements.
F-4
Altamonte Tan, Inc.
Statement of Shareholders' Deficit
For the year ended December 31, 2001
Common Stock Additional
---------------------------
Paid-in Accumulated
Shares Par Value Capital Deficit Total
----------- ------------ -------------- ------------- -----------
Balances at December 31, 2000 500 $ 500 $ 132,036 $ (212,939) $(80,403)
Conversion of shareholder's
advances to capital - - 83,112 83,112
-
Net loss - - - (32,106) (32,106)
----------- ------------ -------------- ------------- -----------
Balances at December 31, 2001 500 $ 500 $ 215,148 $ (245,045) $(29,397)
=========== ============ ============== ============= ===========
See accompanying notes to financial statements.
F-5
Altamonte Tan, Inc.
Statements of Cash Flows
For the year ended December 31, 2001
Cash flows from operating activities:
Net loss $ (32,106)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 23,496
(Increase) decrease in assets:
Inventories (24)
Other current assets 141
Increase (decrease) in liabilities:
Accounts payable 4,553
Deferred revenue 2,002
Accrued expenses (1,171)
------------
Net cash used in operating activities (3,109)
Cash flows from investing activities:
Purchase of property and equipment (2,145)
------------
Net cash used in investing activities (2,145)
Cash flows from financing activities:
Increase in advances from shareholders 17,069
Capital lease obligation repayments (7,135)
------------
Net cash provided by financing activities 9,934
------------
Net increase in cash and cash equivalents 4,680
Cash and cash equivalents - beginning of period 4,551
------------
Cash and cash equivalents - end of period $ 9,231
============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 6,180
============
Conversion of shareholder's advances to
additional paid in capital $ 83,112
============
See accompanying notes to financial statements.
F-6
Altamonte Tan, Inc.
Notes to Financial Statements
December 31, 2001
Note 1 - Summary of Significant Accounting Policies
Reporting Entity. Altamonte Tan, Inc. ("ATI" or the "Company") was
incorporated in the State of Florida on January 1, 1997. The Company is in the
business of providing tanning services from one location, located in Altamonte
Springs, Florida.
Revenue Recognition. Revenue is recognized when the tanning services are
rendered or when the product is sold to customers. Tanning services sold to
customers in a package plan are recorded as deferred revenue and are recognized
as revenue when the customer utilizes the services.
Use of Estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
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.
Cash and Cash Equivalents. The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash
equivalents.
Inventories. Inventories are valued at the lower of cost or market and
consist of tanning lotions and supplies. Cost is determined using the first-in,
first-out method.
Property and Equipment. Property and equipment are carried at cost less
accumulated depreciation. Depreciation is provided over the estimated useful
lives of the assets using the straight-line method. Routine maintenance and
repairs are charged to expense as incurred. Major replacements and improvements
are capitalized. Gains or losses are credited or charged to income upon
disposition.
Impairment of Long-Lived Assets. The Company evaluates its long-lived
assets for financial impairment as events or changes in circumstances indicate
that the carrying value of a long-lived asset may not be fully recoverable. The
Company evaluates the recoverability of long-lived assets by measuring the
carrying amount of the assets against their estimated undiscounted future cash
flows. If such evaluations indicate that the future undiscounted cash flows of
certain long-lived assets are not sufficient to recover the carrying value of
such assets, the assets are adjusted to their fair values.
Income Taxes. The management of ATI has elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under these provisions,
the stockholders report their proportionate share of the Company's income on
their individual tax returns.
Loss per Share. The Company utilizes Financial Accounting Standards Board
Statement No. 128, "Earnings Per Share." Statement No. 128 requires the
presentation of basic and diluted loss per share on the face of the statement of
operations.
Basic loss per share has been calculated using the weighted average number
of common shares outstanding during the period. In calculating diluted loss per
share, the Company had no common stock equivalent shares as of December 31,
2001. However, if the Company had such common stock equivalents, they would be
considered anti-dilutive due to there being losses for all periods presented,
and therefore, basic and diluted loss per share are the same.
F-7
Advertising. Advertising consists primarily of yellow-page and magazine
advertisements. All costs are expensed as incurred. Advertising expense totaled
approximately $3,500 for the year ended December 31, 2001.
Seasonality and Weather. The tanning services market is seasonal as
customers tend to prefer to be outdoors during warmer weather. Accordingly,
demand for the Company's tanning services is generally higher during the winter
and spring (the Company's first and second quarters).
Fair Value of Financial Instruments. The carrying amount of cash and cash
equivalents, accounts payable and accrued expenses approximates fair value
because of the short maturity of those instruments. The fair value of capital
lease obligation is assumed to approximate the recorded value because the
then-prevailing market conditions haven't changed.
Recent Accounting Pronouncements. In July 2001, the Financial Accounting
Standards Board (FASB) issued SFAS No. 141, Business Combinations. SFAS No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The adoption of this standard did not impact our
current financial statements.
In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which is effective January 1, 2002. SFAS No. 142 requires that goodwill
and other intangible assets with indefinite useful lives no longer be amortized,
but instead tested for impairment at least annually. The adoption of this
standard will not have an impact on our financial position and results of
operations.
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations, which is effective for fiscal years beginning after June
15, 2002. SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The adoption of this statement
will have no material impact on this Company's financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which is effective for fiscal years beginning
after December 15, 2001. SFAS No. 144 establishes one accounting model to be
used for long-lived assets to be disposed of by sale and broadens the
presentation of discontinued operations to include more disposal transactions.
Management does not believe that adoption of SFAS No. 144 will have an impact on
our financial position or results of operations.
Note 2 - Property and Equipment
Property and equipment, their estimated useful lives, and related
accumulated depreciation are summarized as follows:
Range of lives in December 31,
years 2001
----------------- ---------------
Tanning equipment 5 - 7 $ 68,148
Office furniture and fixtures 5 - 7 7,689
Office equipment 5 - 7 4,376
Leasehold improvements 5 51,790
---------------
132,003
Less accumulated depreciation 94,536
---------------
Total property and equipment $ 37,467
===============
Depreciation expense amounted to $23,496 for the year ended December 31,
2001.
F-8
Note 3 - Capital Lease
The Company leases certain equipment under an agreement that is
classified as a capital lease. The cost of the equipment under this capital
lease is included in the Balance Sheet as property and equipment and was $19,977
at December 31, 2001. Accumulated amortization of the leased equipment at
December 31, 2001 was $4,281. Amortization of the asset under the capital lease
amounted to $2,854 during the year ended December 31, 2001 and is included in
depreciation expense.
The future minimum lease payments required under the capital lease and
the present value of the net minimum lease payments as of December 31, 2001, are
as follows:
Amount payable in:
------------------
2002 $ 7,517
2003 3,759
-----------
11,276
Less: amount representing interest 1,924
-----------
Present value of capital lease obligation $ 9,352
===========
Note 4 - Operating Leases
As of December 31, 2001, ATI was committed to a non-cancelable
operating lease on operating facilities, with rent of $3,380 per month, which
was to expire on March 31, 2002. ATI subsequently exercised an option to renew
the lease for an additional five-year term, commencing March 1, 2002. The
following is a schedule of future minimum rental commitments, by year and in the
aggregate, to be paid under this lease, including the renewal period.
2002 $ 41,350
2003 42,419
2004 43,361
2005 44,332
2006 45,331
Thereafter 7,727
------------
$ 224,520
============
Total lease expense amounted to $39,334 for the year ended December 31,
2001.
Note 5 - Related Party Transactions
The stockholders of ATI from time to time have advances money to the
Company for operating and capital purposes. These advances were made without any
scheduled repayment term and without provision for interest.
At December 31, 2001, the stockholders of the Company entered into an
agreement whereby one of the stockholders purchased the other's shares in the
Company and the balance of the advances payable to the stockholder. The balance
of the stockholder advances at that point, which was $83,112, was subsequently
converted into additional paid in capital.
The balance of advances due to stockholders at December 31, 2001, was
$48,671.
F-9
Note 6 - Subsequent Event
On February 28, 2002, UT Holdings, Inc., the wholly-owned subsidiary of
Universal Tanning Ventures, Inc., purchased substantially all of ATI's assets in
exchange for $30,000 and the assumption of certain liabilities. The president
and stockholder of ATI is also the chief executive officer and a stockholder of
Universal Tanning Ventures, Inc. After the transaction was completed, the
Company ceased operations.
F-10
Independent Auditors' Report
To the Board of Directors and Stockholders of
Universal Tanning Ventures, Inc.:
We have audited the accompanying consolidated balance sheet of Universal Tanning
Ventures, Inc. and Subsidiary (the "Company") as of September 30, 2002, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the nine months then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Universal Tanning
Ventures, Inc. and Subsidiary as of September 30, 2002, and the results of its
operations and its cash flows for the nine months then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ Tedder, James, Worden & Associates, P.A.
Orlando, Florida
November 18, 2002
F-11
Universal Tanning Ventures, Inc.
And Subsidiary
Consolidated Balance Sheet
September 30, 2002
Assets
------
Current assets:
Cash and cash equivalents $ 82,495
Inventories 9,429
Prepaid consulting fees 108,333
Other current assets 1,243
-----------
Total current assets 201,500
Property and equipment, net 102,367
Deferred offering costs 40,000
-----------
Total assets $ 343,867
===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 1,100
Deferred revenue 11,147
Accrued expenses 3,693
Current maturities of capital lease obligations 3,861
-----------
Total current liabilities 19,801
Stockholders' equity
Common stock, $0.0001 par value, 10,000,000 shares
authorized, 7,500,000 shares issued and outstanding 750
Additional paid-in capital 562,250
Accumulated deficit (238,934)
-----------
Total stockholders' equity 324,066
-----------
Total liabilities and stockholders' equity $ 343,867
===========
See accompanying notes to financial statements.
F-12
Universal Tanning Ventures, Inc.
And Subsidiary
Consolidated Statement of Operations
For the nine months ended September 30, 2002
Revenue:
Tanning service $ 58,242
Product sales, net of returns and allowances 10,712
------------
Total revenue 68,954
Cost of revenue
Tanning services 59,971
Product sales 4,204
------------
Total cost of revenue 64,175
------------
Gross profit 4,779
Selling, general and administrative expenses
244,893
------------
Loss from operations
(240,114)
Non-operating income (expense), net
1,180
------------
Net loss $ (238,934)
============
Weighted average common shares outstanding 6,040,091
============
Basic and diluted loss per share $ (0.04)
============
See accompanying notes to financial statements.
F-13
Universal Tanning Ventures, Inc.
And Subsidiary
Consolidated Statements of Stockholders' Equity
Nine months ended September 30, 2002
Common Stock Additional
-------------------------- Paid-in Accumulated
Shares Par Value Capital Deficit Total
------------ ------------- ------------- --------------- ------------
Balances at December 31, 2001 - - - - -
Issuance of common stock to
founders of Universal Tanning
Ventures, Inc. 5,000,000 $ 500 - - $ 500
Issuance of common stock for
cash, net of issuance costs 2,500,000 250 562,250 - 562,500
Net loss - - - (238,934) (238,934)
------------ ------------- ------------- ---------------- ------------
Balances at September 30, 2002 7,500,000 $ 750 $ 562,250 $ (238,934) $ 324,066
============ ============= ============= ================ ============
See accompanying notes to financial statements.
F-14
Universal Tanning Ventures, Inc.
And Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2002
Cash flows from operating activities:
Net loss $ (238,934)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 11,968
(Increase) decrease in assets:
Inventories (9,429)
Prepaid consulting fees (108,333)
Other current assets (1,243)
Increase (decrease) in liabilities:
Accounts payable 1,100
Deferred revenue 11,147
Accrued expenses 3,693
-----------
Net cash used in operating activities (330,031)
Cash flows from investing activities:
Purchase of property and equipment (106,243)
-----------
Net cash used in investing activities (106,243)
Cash flows from financing activities:
Proceeds from issuance of common stock 563,000
Deferred offering costs (40,000)
Capital lease obligation repayments (4,231)
-----------
Net cash provided by financing activities 518,769
-----------
Net increase in cash and cash equivalents 82,495
Cash and cash equivalents - beginning of period -
-----------
Cash and cash equivalents - end of period $ 82,495
===========
Supplemental disclosures of cash flow information:
Cash paid during theperiod for:
Interest $ 1,682
===========
Assumption of capital lease obligation from Altamonte Tan, Inc. $ 8,092
===========
See accompanying notes to financial statements.
F-15
Universal Tanning Ventures, Inc.
And Subsidiary
Notes to Consolidated Financial Statements
September 30, 2002
Note 1 - Summary of Significant Accounting Policies
Reporting Entity and Principles of Consolidation. Universal Tanning
Ventures, Inc. and Subsidiary ("Universal" or the "Company") were incorporated
in the State of Delaware on January 4, 2002 and January 24, 2002, respectively.
The Company is in of the business of providing tanning services from one
location, located in Orlando, Florida. During the periods of January 4, 2002 and
January 24, 2002 through February 28, 2002, the company's operations were
primarily organizational.
The Company's consolidated financial statements for the nine months
ended September 30, 2002, include the accounts of its wholly owned subsidiary UT
Holdings, Inc., a Delaware corporation. All intercompany balances and
transactions have been eliminated.
Initial public offering. In November 2002, the Company's Board of
Directors authorized management to file a registration statement with the
Securities and Exchange Commission to permit the Company to sell its common
stock to the public.
Revenue Recognition. Revenue is recognized when the tanning services
are rendered or when the product is sold to customers. Tanning services sold to
customers in a package plan are recorded as deferred revenue and are recognized
as revenue when the customer utilizes the services.
Use of Estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
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.
Cash and Cash Equivalents. The Company considers all short-term
investments with an original maturity of three months or less when purchased to
be cash equivalents.
Inventories. Inventories are valued at the lower of cost or market and
consist of tanning lotions and supplies. Cost is determined using the first-in,
first-out method.
Property and Equipment. Property and equipment are carried at cost less
accumulated depreciation. Depreciation is provided over the estimated useful
lives of the assets using the straight-line method. Routine maintenance and
repairs are charged to expense as incurred. Major replacements and improvements
are capitalized. Gains or losses are credited or charged to income upon
disposition.
Impairment of Long-Lived Assets. The Company evaluates its long-lived
assets for financial impairment as events or changes in circumstances indicate
that the carrying value of a long-lived asset may not be fully recoverable. The
Company evaluates the recoverability of long-lived assets by measuring the
carrying amount of the assets against their estimated undiscounted future cash
flows. If such evaluations indicate that the future undiscounted cash flows of
certain long-lived assets are not sufficient to recover the carrying value of
such assets, the assets are adjusted to their fair values.
F-16
Income Taxes. The Company accounts for income taxes utilizing the asset
and liability method. This approach requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences attributable to
temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enacted date.
Loss per Share. The Company utilizes Financial Accounting Standards
Board Statement No. 128, "Earnings Per Share." Statement No. 128 requires the
presentation of basic and diluted loss per share on the face of the statement of
operations.
Basic loss per share has been calculated using the weighted average
number of common shares outstanding during the period. In calculating diluted
loss per share, the Company had no common stock equivalent shares as of
September 30, 2002. However, if the Company had such common stock equivalents,
they would be considered anti-dilutive due to there being losses, and therefore,
basic and diluted loss per share are the same.
Advertising. Advertising consists primarily of yellow-page and magazine
advertisements. All costs are expensed as incurred. Advertising expense totaled
approximately $4,200 for the nine months ended September 30, 2002.
Concentration of Credit Risk. Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
cash. The Company places its cash with high credit quality financial
institutions. At various times throughout the nine months ended September 30,
2002, cash balances held at some financial institutions were in excess of
federally insured limits.
Seasonality and Weather. The tanning services market is seasonal, as
customers tend to prefer to be outdoors during warmer weather. Accordingly,
demand for the Company's tanning services are generally higher during the winter
and spring (the Company's first and second quarters).
Fair Value of Financial Instruments. The carrying amount of cash and
cash equivalents, accounts payable and accrued expenses approximates fair value
because of the short maturity of those instruments. The fair value of the
capital lease obligation is assumed to approximate the recorded value because
the then-prevailing market conditions have not changed.
Recent Accounting Pronouncements. In August 2001, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which is effective for fiscal years
beginning after December 15, 2001. SFAS No. 144 establishes one accounting model
to be used for long-lived assets to be disposed of by sale and broadens the
presentation of discontinued operations to include more disposal transactions.
Management does not believe that adoption of SFAS No. 144 will have an impact on
our financial position or results of operations.
In April 2002, the FASB issued Statement No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This newly issued standard rescinds SFAS 4, Reporting Gains and
Losses from Extinguishment of Debt-an amendment of APB Opinion No. 30, which
required all gains and losses from the extinguishment of debt to be aggregated
and, if material, classified as an extraordinary item, net of related income tax
effect. As a result, the criteria set forth by APB Opinion 30 will now be used
to classify those gains and losses. SFAS 145 also amends FAS 13 to require that
certain lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.
In addition, SFAS 145 amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings or describe their applicability
under changed conditions. For the provisions related to the rescission of SFAS
4, SFAS 145 is effective for the Company beginning in fiscal year 2004. The
remaining provisions of SFAS 145 are effective for the Company in fiscal year
2003. The Company does not expect the adoption of SFAS 145 to have a material
impact on its consolidated financial statements.
F-17
In June 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. The Statement requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. Prior guidance required that a liability for an
exit cost be recognized at the date of an entity's commitment to an exit plan.
This Statement also establishes that fair value is the objective for initial
measurement of the liability. SFAS 146 is effective for exit or disposal
activities that are initiated after December 31, 2002. The Company does not
expect the adoption of SFAS 146 to have a material impact on its consolidated
financial statements.
Note 2 - Acquisition of Altamonte Tan, Inc.
On February 28, 2002, the Company acquired substantially all of the assets
of Altamonte Tan, Inc. ("ATI"), a company whose assets were being used to
operate a tanning company, and assumed certain liabilities in exchange for
$30,000. Universal expects to expand on these initial operations by acquiring
additional tanning salons and industry related entities in an effort to be the
first national tanning services organization, but also expects to reduce costs
through economies of scales. Operating results with the asset acquisition have
been included since that date. The acquisition of ATI was accounted for in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 141
"Business Combinations" ("SFAS 141"), which requires all business combinations
initiated after June 30, 2001 to be accounted for under the purchase method. The
assets acquired and liabilities assumed were recorded at estimated fair values
as determined by our management, based on information available and on
assumptions as to future operations.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition.
At February 28, 2002
Inventory $ 9,071
Property and equipment 41,648
--------------
Total assets acquired 50,719
--------------
Deferred revenue 12,627
Capital lease obligation 8,092
--------------
Total liabilities assumed 20,719
--------------
Net assets acquired $ 30,000
==============
Note 3 - Deferred Offering Costs
Deferred offering costs at September 30, 2002, consisted of the legal fees
in the amount of $40,000 relating to the Company's anticipated public offering.
F-18
Note 4 - Property and Equipment
Property and equipment, their estimated useful lives, and related
accumulated depreciation are summarized as follows:
Range of lives September 30,
in years 2002
------------------ -----------------
Tanning equipment 7 $ 78,588
Office furniture and fixtures 5 - 7 1,335
Office equipment 5 - 7 600
Leasehold improvements 5 33,812
-----------------
114,335
Less accumulated depreciation (11,968)
-----------------
Total property and equipment $ 102,367
=================
Depreciation expense amounted to $11,968 for the nine months ended
September 30, 2002.
Note 5 - Income Taxes
At September 30, 2002, the Company had net operating loss carryforwards for
income tax purposes of approximately $238,000 available as offsets against
future taxable income. The net operating loss carryforwards are expected to
expire through 2022.
The tax effects of the primary temporary differences giving rise to the
Company's deferred tax assets and liabilities are as follows for the nine months
ended September 30, 2002:
Deferred tax assets:
Net operating loss $ 88,400
Capital lease obligation, payments treated as rent for tax return and
capitalized and depreciated for financial reporting purposes 1,400
Revenue on tanning packages recognized for tax return and deferred for
financial reporting 4,100
-------------
Total deferred tax assets 93,800
Deferred tax liabilities:
Difference between book and tax depreciation 2,200
-------------
Total deferred tax liabilities 2,200
-------------
Net deferred tax assets 91,700
-------------
Less valuation allowance (91,700)
-------------
Net deferred tax asset $ -
=============
There was no change in the valuation allowance since this is the Company's
initial year of operations.
Note 6 - Private Placement Offering
During the nine months ended September 30, 2002, the Company sold, in a
private placement, 2,500,000 shares of its common stock at a price of $0.25 per
share. Proceeds from the offering totaled $625,000 less expenses of $62,500, for
a net amount received of $562,500.
F-19
Note 7 - Capital Lease
As part of the purchase agreement discussed at Note 2, the Company assumed
a lease for tanning equipment under an agreement that is classified as a capital
lease. The recorded value of the equipment under this capital lease is included
in the Balance Sheet at September 30, 2002 as property and equipment and is
valued at $15,221. Accumulated amortization of the leased equipment at September
30, 2002 was $1,666. Amortization of the asset under capital lease for the nine
months ended September 30, 2002, of $1,666 and is included in depreciation
expense.
The future minimum lease payments required under the capital lease and the
present value of the net minimum lease payments as of September 30, 2002, are as
follows:
Amounts due within one year $ 3,969
Less: amount representing interest 108
-------------
Present value of the capital lease obligation $ 3,861
=============
Note 8 - Operating Leases
Universal has committed to a non-cancelable operating lease on operating
facilities with rent of $3,459 per month, which expires February 28, 2007. The
following is a schedule of future minimum rental commitments, by year and in the
aggregate, to be paid under this non-cancelable operating lease.
For the year ended September 30,
2003 $ 42,441
2004 43,498
2005 44,803
2006 46,147
2007 19,464
-----------------
Total $ 196,353
=================
Total lease expense amounted to $24,433 for the nine months ended September
30, 2002.
Note 9 - Certain Consulting Transactions
Since the inception of the Company in January 2002, the Company has
employed various consultants to advise the company in matters related to the
marketing of its products, the identification of investors and the
implementation of short and long term strategic planning. The following is a
brief description of the consulting agreements entered into during 2002.
Varela Consulting Group. The Company entered into a 6-month agreement in
July 2002 with Varela Consulting Group ("Varela") to represent the Company
relating to the potential sale of its products and services to business contacts
and potential customers worldwide, particularly in Central and South America.
Compensation paid to Varela for their services totaled $100,000 and is being
amortized over the life of the contract on a straight-line basis. The remaining
unamortized portion of the contract is accounted for on the balance sheet under
the caption prepaid consulting fees. The spouse of the sole shareholder of
Varela is a founding stockholder of Universal.
Brannon Capital Corp. The Company entered into a 12-month agreement in
March 2002 with Brannon Capital Corp. ("BCC") to advise the Company in the
implementation of short and long-term strategic planning, recruitment and
employment of key executives consistent with the expansion of operations and
advising the
F-20
company concerning matters related to the management and organization of the
Company. Compensation paid to BCC for their services totaled $100,000 and is
being amortized over the life of the contract on a straight-line basis. The
remaining unamortized portion of the contract is accounted for on the balance
sheet under the caption prepaid consulting fees. The sole shareholder of BBC is
also a founding stockholder of Universal.
Market Media, Inc. The Company entered into an agreement in July 2002 with
Market Media, Inc. ("MMI") to advise the Company in investor and public
relations matters as it relates to the Company's initial public offering. The
$100,000 in consulting fees paid to MMI as compensation for services provided
have been accounted for as deferred offering costs and will be offset against
additional paid in capital at the completion of this offering.
Note 10 - Employment Agreement
On February 28, 2002, the Company entered into a two-year employment
agreement with its chief executive officer. The agreement provides for a base
salary of $2,500 per month.
F-21
Introduction to Unaudited Pro Forma Combined Financial Statements
The following Unaudited Pro Forma Combined Statement of Operations for the nine
months ended September 30, 2002 for Universal Tanning Ventures, Inc. and
Subsidiary and the two months ended February 28, 2002 for Altamonte Tan, Inc.
The Unaudited Pro Forma Balance Sheet presents the consolidated financial
position of Universal Tanning Ventures, Inc. and Subsidiary as of September 30,
2002 assuming that the proposed initial public offering had occurred as of
January 4, 2002 (date of incorporation). Such pro forma information is based
upon the historical balance sheet data of Universal Tanning Ventures, Inc. and
Subsidiary as of that date. The Unaudited Pro Forma Statement of Operations
gives effect to the combined operations for the nine months ended September 30,
2002 for Universal Tanning Ventures, Inc. and Subsidiary, which includes the
results of Altamonte Tan, Inc. for the two months ended February 28, 2002.
The Unaudited Pro Forma Financial Information has been prepared by the Company
based on the historical consolidated financial statements of Universal Tanning
Ventures, Inc and Subsidiary which are included elsewhere in this registration
statement. The Unaudited Pro Forma Financial Information is presented for
illustrative purposes only and does not purport to indicate the results that
would have been obtained if the transactions had occurred on the dates indicated
or to project those that will be realized in the future. These Unaudited Pro
Forma Financial Statements should be read in conjunction with the historical
consolidated financial statements of Universal Tanning Ventures, Inc. and the
financial statements of Altamonte Tan, Inc. included elsewhere in this
registration statement.
F-22
Universal Tanning Ventures, Inc. and Subsidiary
Unaudited Pro Forma Combined Statement of Operations
Universal Tanning Altamonte Tan,
Ventures, Inc. and Inc.
Subsidiary Two Months
Nine Months Ended Ended February Pro Forma
September 30, 2002 28, 2002 Combined
(Successor) (Successor) As Adjusted
Revenue:
Tanning service $ 58,242 16,229 74,471
Product sales, net of returns and
allowances 10,712 3,007 13,719
------------------ -------------- -----------
Total revenue 68,954 19,236 88,190
Cost of revenue 64,175 16,631 80,806
------------------ -------------- -----------
Gross Profit 4,779 2,605 7,384
Selling, general and administrative
expenses 244,893 5,944 250,837
------------------ -------------- -----------
Loss from operations (240,114) (3,339) (243,453)
Non-operating income (expense), net 1,180 - 1,180
------------------ -------------- -----------
Net loss $ (238,934) (3,339) (242,273)
================== ============== ===========
Weighted average common shares
outstanding
Basic and diluted 6,040,091 6,040,091
===========
Earnings per share:
Basic and diluted $ (0.04) $ (0.04)
================== ===========
See accompanying notes to unaudited pro forma consolidated financial
statements.
F-23
================================================================================
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell or
buy any shares in any jurisdiction where it is unlawful. The information in this
prospectus is current only as of its date.
------------------
TABLE OF CONTENTS
Section Page
- ------- ----
Special Note About Forward-Looking Statements ........................... 1
Prospectus Summary ...................................................... 2
Summary Financial Information ........................................... 4
Risk Factors ............................................................ 5
Use of Proceeds ......................................................... 10
Dilution ................................................................ 12
Dividend Policy ......................................................... 13
Capitalization .......................................................... 13
Selling Security Holders ................................................ 13
Management's Discussion and Analysis Financial Condition and
Results of Operations ................................................ 14
Business ................................................................ 21
Management .............................................................. 29
Principal Stockholders .................................................. 31
Certain Transactions .................................................... 32
Market For Our Common Stock and Related Stockholder Matters ............. 33
Description of Capital Stock ............................................ 34
Shares Eligible for Future Sale ......................................... 34
Plan of Distribution .................................................... 35
Legal Matters ........................................................... 35
Experts ................................................................. 36
Available Information ................................................... 37
Index to Consolidated Financial Statements .............................. F-1
Until ________, 2003, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
1,000,000 Shares
Universal Tanning Ventures, Inc.
Common Stock
$1.00 Per Share
--------------
PROSPECTUS
--------------
_____________, 2003
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Officers and Directors.
Section 145 of the Delaware Corporation Law provides, in effect, that we
may, and in certain cases must, indemnify any person made a party to any action
by reason of the fact that he is or was one of our directors, officers,
employees, or agents against, in the case of a non-derivative action, judgments,
fines, amounts paid in settlement and reasonable expenses (including attorneys'
fees) incurred by him as a result of such action, and in the case of a
derivative action, against expenses (including attorney's fees), if in either
type of action he acted in good faith and in a manner he reasonably believed to
be in or not opposed to our best interests. This indemnification does not apply,
in a derivative action, to matters as to which it is adjudged that the director,
officer, employee or agent is liable to us, unless upon court order it is
determined that, despite such adjudication of liability, but in view of all the
circumstances of the case, he is fairly and reasonably entitled to indemnity for
expenses, and, in a non-derivative action, to any criminal proceeding in which
such person had reasonable cause to believe his conduct was unlawful.
Our bylaws provide that we shall indemnify, to the fullest extent permitted
by Delaware law, any and all of our directors and officers, or former directors
and officers, or any person who may have served at our request as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers or persons controlling our company pursuant to the foregoing
provisions, it is an the opinion of the Securities and Exchange Commission that
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling person of the registrant in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
ITEM 25. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with the issuance and distribution of
the securities being registered hereby are itemized below.
SEC registration fee ......................................... $ 239
Accounting fees and expenses ................................. $ 35,000
Legal fees and expenses /(1)/ ................................ $ 50,000
Printing, freight and engraving expenses ..................... $ 7,500
Transfer Agent and Registrar fees and expenses ............... $ 2,500
Blue Sky fees and expenses ................................... $ 4,500
Miscellaneous ................................................ $ 1,461
-----------
Total /(2)/ ......................................... $101,200
========
__________
(1) Of the legal fees and expenses set forth above, $40,000 have already been
paid and are reflected on the balance sheet as Deferred offering costs at
September 30, 2002.
(2) Estimated costs paid from the proceeds of this offering are estimated to be
$61,200 (Total offering costs of $101,200 less prepaid legal fees and
expenses as reflected on the balance sheet as Deferred offering costs at
September 30, 2002 of $40,000).
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ITEM 26. Recent Sales of Unregistered Securities.
Set forth below in chronological order is information regarding the number
of shares of common stock sold by us and the number of options and warrants
issued by us within the past three years, and the consideration received by us
for such shares, options and warrants. None of the securities were registered
under the Securities Act. In our opinion, the sale and issuance of the
securities was deemed to be exempt from registration under the Securities Act in
reliance upon Section 4(2) of the Securities Act as transactions by an issuer
not involving any public offering. The recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were fixed to the share
certificates issued in such transactions. All recipients had an opportunity to
ask questions about us and had adequate access to information about us. Except
as otherwise noted, no sales of securities involved the use of an underwriter,
broker or other agent and no commissions were paid in connection with the sale
or issuance of any securities.
Commencing on or about February 25, 2002 and closing on August 1, 2002, the
company offered and sold 2,500,000 shares of its common stock to 91 accredited
investors at a purchase price of $0.25 per share. Each of the investors had
access to and was provided with relevant information concerning the company. The
securities were exempt from registration pursuant to Rule 506 of Regulation D
and Section 4(2) of the Securities Act of 1933, as amended.
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ITEM 27. Exhibits and Financial Statements.
(a) Unless otherwise indicated, the following exhibits are filed herewith:
EXHIBIT
NUMBER DESCRIPTION
---------- ---------------------------------------------------------------
3.1 Form of Articles of Incorporation of Universal Tanning
Ventures+
3.2 By-laws of Universal Tanning Ventures+
4.1 Form of Specimen Common Stock Certificate*
5.1 Opinion of Greenberg Traurig, P.A.*
10.1 Asset Purchase Agreement by and between Universal Tanning
Ventures, Inc. and Altamonte Tan, Inc. dated February 28,
2002 /(1)/
10.2 Subscription Agreement*
10.3 Employment Agreement of Glen Woods dated February 28, 2002
/(1)/
10.4 Consulting Agreement by and between Varela Consulting Group and
Universal Tanning Ventures, Inc. dated July 23, 2002
10.5 Consulting Agreement by and between Brannon Capital Corp. and
Universal Tanning Ventures, Inc. dated March 1, 2002
10.6 Consulting Agreement by and between Bushido Ventures, Inc. and
Universal Tanning Ventures, Inc. dated March 1, 2002
10.7 Consulting Agreement by and between Market Media, Inc. and
Universal Tanning Ventures, Inc. dated July 23, 2002
23.1 Consent of Greenberg Traurig, P.A. (contained in Exhibit 5.1)
23.2(a) Consent of Tedder, James, Worden & Associates, P.A. for
Universal Tanning Ventures, Inc.
23.2(b) Consent of Tedder, James, Worden & Associates, P.A. for
Altamonte Tan, Inc.
____________________
* To be filed by amendment.
+ Previously filed.
/(1)/Previously filed on November 27, 2002; filed again with Amendment No.1
to show conformed signatures.
ITEM 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-3
b. to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
c. to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Altamonte Springs,
Florida, on January 14, 2003.
UNIVERSAL TANNING VENTURES, INC.
By: /s/ Glen Woods
--------------------------------------
Name: Glen Woods
Title: President, CEO, Principal Financial
Officer and Director
By: /s/ Dyron Watford
--------------------------------------
Name: Dyron Watford
Title: Principal Accounting Officer and
Director
II-5
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
--------- -----------------------------------------------------------------
3.1 Form of Articles of Incorporation of Universal Tanning Ventures+
3.2 By-laws of Universal Tanning Ventures+
4.1 Form of Specimen Common Stock Certificate*
5.1 Opinion of Greenberg Traurig, P.A.*
10.1 Asset Purchase Agreement by and between Universal Tanning
Ventures, Inc. and Altamonte Tan, Inc. dated February 28, 2002
/(1)/
10.2 Subscription Agreement*
10.3 Employment Agreement of Glen Woods dated February 28, 2002 /(1)/
10.4 Consulting Agreement by and between Varela Consulting Group and
Universal Tanning Ventures, Inc. dated July 23, 2002
10.5 Consulting Agreement by and between Brannon Capital Corp. and
Universal Tanning Ventures, Inc. dated March 1, 2002
10.6 Consulting Agreement by and between Bushido Ventures, Inc. and
Universal Tanning Ventures, Inc. dated March 1, 2002
10.7 Consulting Agreement by and between Market Media, Inc. and
Universal Tanning Ventures, Inc. dated July 23, 2002
23.1 Consent of Greenberg Traurig, P.A. (contained in Exhibit 5.1)
23.2(a) Consent of Tedder, James, Worden & Associates, P.A. for Universal
Tanning Ventures, Inc.
23.2(b) Consent of Tedder, James, Worden & Associates, P.A. for Altamonte
Tan, Inc.
________________________
* To be filed by amendment.
+ Previously filed.
/(1)/Previously filed on November 27, 2002; filed again with Amendment
No.1 to show conformed signatures.