10-Q
2011-09-30
false
Ultra Sun Corp
0001360442
--12-31
1300000
Smaller Reporting Company
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<!--egx--><p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><b>1. Summary of Significant Accounting Policies and Use of Estimates:</b></p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><i>Presentation of Interim Information:</i></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">The condensed financial statements included herein have been prepared by Ultra Sun Corp. (“we”, “us”, “our” or “Company”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements as of December 31, 2010. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, as permitted by the SEC, although we believe the disclosures, which are made, are adequate to make the information presented not misleading. Further, the condensed financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at September 30, 2011, and the results of our operations and cash flows for the periods presented. The December 31, 2010 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">Interim results are subject to significant seasonal variations and the results of operations for the nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"> </p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><i>Nature of Corporation:</i></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">The Company was organized under the laws of the State of Nevada on November 5, 2004 and has elected a fiscal year end of December 31. On November 15, 2004 (Date of Acquisition) the Company acquired the net assets, with a deemed fair value of ($5,118) on the date of acquisition, and the existing business and trade name of Sahara Sun (a DBA of Neil Blosch, the sole proprietor), for the purpose of continuing operations in the tanning salon business (the Acquisition). In connection with the Acquisition, the Company also issued $5,000 in stock and $78,000 in notes payable, and acquired a covenant-not-to-compete with a deemed fair value of $88,118, which has been fully amortized.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><i>Use of Estimates:</i></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">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.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><i>Inventory:</i></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">Inventory consists of tanning products such as oils and bronzers and candles purchased for resale and is stated at the lower of cost determined by the first-in first-out (FIFO) method or market. Inventory cost includes those costs directly attributable to the product before sale.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><i>Fair Value of Financial Instruments:</i></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of accounts payable, accrued liabilities, and notes payable approximate fair value given their short term nature or effective interest rates.</p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><i>Earnings per Share:</i></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period and contains no dilutive securities. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The Company calculates diluted earnings per share using the treasury stock method. For the nine month periods ended September 30, 2011 and 2010, the Company had no dilutive securities outstanding.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><i>Revenue Recognition</i></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">The Company recognizes revenue from product or tanning sales at the time the purchase is made or services are rendered. Gift certificates issued are recognized as a liability at the time the gift certificates are sold.<b> </b>Revenue is recognized for these gift certificates when the services are provided.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><i>Income Taxes:</i></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">From November 4, 2004, date of inception, through May 31, 2006, the Company operated as a Subchapter S Corporation for tax purposes and cumulative losses of $163,076 were passed through to the Company’s stockholders. Effective June 1, 2006, the Company converted to a “C” corporation.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">The Company estimates the annual tax rate based on projected taxable income for the full year and records a quarterly income tax provision in accordance with the anticipated annual rate. As the year progresses, we refine the estimates of the year’s taxable income as new information becomes available, including year-to-date financial results. This continual estimation process can result in a change to the expected effective tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual tax rate. Significant judgment may be required in determining the Company’s effective tax rate and in evaluating our tax positions.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">The effective income tax rate of 0% for the nine months ended September 30, 2011 and 2010 differed from the statutory rate, due primarily to net operating losses incurred by the Company in past and/or respective period. For the nine month periods ended September 30, 2011and 2010 tax benefits of approximately $720 and $10,100 would have been generated. However, all benefits have been fully offset through an allowance account due to the uncertainty of the utilization of the net operating losses. As of September 30, 2011 the Company had net operating losses of approximately $101,000 resulting in a deferred tax asset of approximately $40,400. The Company has established a valuation allowance in the full amount of the deferred tax asset due to the uncertainty of the utilization of operating losses in future periods.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><i>Pending Accounting Pronouncements:</i></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">There have been no recent accounting pronouncements issued which are expected to have a material effect on the Company’s financial statements.</p>
<!--egx--><p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><b>2. Unamortized Forgiveness of Rent</b></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">In November of 2008, the Company’s landlord agreed to waive $7,870 in unpaid rent that was currently due, or due in the future, under the lease agreement, as inducement to sign a new five year lease in its current location. The amount of unpaid rent is being amortized, as a reduction of rent expense, over the term of the five year lease. During the nine months ended September 30, 2011 and 2010 the Company recognized a reduction in rent expense of $1,181 and $1,180 due to the amortization of the rent forgiveness. As of September 30, 2011, $3,016 of unamortized rent forgiveness remains and will be recognized over the remaining months of the lease agreement as a reduction of current period rent expense.</p>
<!--egx--><p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><b>3. Related Party Transactions</b></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">On January 26, 2011, the Company issued a promissory note in the principal amount $2,500 to evidence a loan made to the Company by Jeff W. Holmes, a beneficial owner. The terms of the note were 6 months with interest at 8% per annum, with principal and interest due June 30, 2011. This note has been extended for an additional six months with principal and interest now due December 31, 2011.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">On January 26, 2011, the Company issued a promissory note in the principal amount $2,500 to evidence a loan made to the Company by Kirk Blosch, a beneficial owner. The terms of the note were 6 months with interest at 8% per annum, with principal and interest due June 30, 2011. This note has been extended for an additional six months with principal and interest now due December 31, 2011.</p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">As of September 30, 2011 the Company has a total of $42,500 in short-term related party notes issued and outstanding along with $9,788 in accrued interest related to those notes.</p>
<!--egx--><p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:"><b>4. Subsequent Events</b></p> <p style="LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:; tab-stops:500.1pt"> </p> <p style="TEXT-JUSTIFY:inter-ideograph; TEXT-ALIGN:justify; LINE-HEIGHT:normal; MARGIN:0in 0in 0pt; TEXT-AUTOSPACE:">Management has reviewed subsequent events from September 30, 2011 through the date of this filing. No material subsequent events were noted.</p>
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