Item 1. Business
Introduction
Thermal Tennis Inc. (sometimes referred to hereinafter as “Thermal” and/or “Thermal Tennis”), is a corporation formed in the state of Nevada on August 25, 1999, and is committed to the growth of tennis. Thermal previously managed the tennis operations at one athletic club and ran one summer tennis program at a high school. Thermal canceled the contract at the athletic club on March 31, 2013 and due to previous commitments did not run any summer tennis programs. Thermal believes that tennis is a lifetime sport and that one's life is enhanced by participation in the game. We believe many facilities, both public and private are underutilized, poorly managed, and not marketed to the tennis community. Thermal believes there is a very good opportunity to generate and greatly improve revenues, and create hassle free tennis management for property owners at their existing facility. The Physical Activity Council reported, "tennis is the fastest growing traditional sport in the U.S., up 46% from 2000 to 2010." The Tennis Industry Association President, Jon Muir stated in September, 2010, in a Forbes interview, "participation over the last six years [in tennis] is up 43%". . . "yes, tennis has been affected the past three years but is still in a growth mode." This is the most recent statistical information we have with respect to the growth of tennis. Accordingly, these trends may not have continued and tennis participation in the United Sates may have in fact declined and may decline in the future.
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Business Description
Our president, Mr. Deller, started playing tennis at age 13 and became a high school and collegiate champion. He then played professional tennis on various national and worldwide circuits from 1979 until 1984. Mr. Deller has remained involved in tennis on various levels including teaching, coaching, recruiting, playing, consulting, tennis court construction, corporate advisory staff, association startup and many others. Mr. Deller is the sole officer of the Company.
Thermal Tennis has limited history due to a lapse in revenue from 2001 to 2003 and from 2006 to early 2009. The Company obtained its first new contract since 2006 in 2009. This was the sole contract the Company generated revenues from operations during the period of 2010 through March 31, 2013. The contract was on a month to month basis and was cancelled by Thermal effective March 31, 2013. In 2012, we had gross revenue from the club of $87,672 and gross revenue of $9,827 from a summer program we manage at Reno High School. During the first quarter of 2013, we generated $10,927 in revenues from the club previous to terminating the contract.
Under its contract with the Caughlin Athletic Club (the "Club"), Thermal Tennis ran the tennis operation for the Club and received all revenue from those operations including revenue from lessons, tournaments, clinics and the like. Costs that were allocated to Thermal Tennis under its contract with the Club included paying the tennis instructors, paying for liability insurance and workers compensation insurance, paying for periodic cleaning of the tennis courts and other miscellaneous expenses. The Club benefited when more persons joined the Club to take advantage of its tennis opportunities because monthly Club dues are retained by the Club. Thermal believed it could improve the gross profit as it refined the programs offered and would increase memberships, lessons, clinics and tournaments. However, there was no guarantee that the Company would be able to increase the gross profits. Neither was there any guarantee that the contract will not be cancelled by the tennis facility. Therefore, due to not being able to accomplish the previous items over the last three years the Company terminated the contract.
Thermal intends to bid on seasonal facilities beginning each summer hoping to produce $45,000 of gross revenues on each contract with gross profit on each contract to be between $5,000 and $10,000. There is no guarantee, however, that we will be selected to run any seasonal facilities or that our gross revenue or gross profit projections will be realized.
Mr. Deller is still developing his tennis management system which includes coming up with more effective ways to recruit new members to tennis clubs, recruiting more people into tennis lessons, the implementation of more effective tennis teaching methods, better and more effective use of tournaments to create public participation and involvement and developing additional ways to create revenue for the Company and the tennis facility being managed. The tennis management system would then be used by the Company to manage tennis venues. Though the Company may try to expand its business area in the future, at the present time it is limiting the area in which it is recruiting new clients to Northern Nevada and Lake Tahoe.
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Principal Products or Services and their Markets
Thermal has been in negotiations to run two additional tennis facilities at sites in Northern Nevada and Lake Tahoe. There is no guarantee that we will be successful in these negotiations. Mr. Deller knows the coaching staff of the University of Nevada's tennis program. Tennis players at the University have in the past been a resource as part time tennis instructors for the Company and may be available as needed in the future. Instructors are trained by Thermal president, Bob Deller, in his teaching methods. Mr. Deller is the Company's only employee and works on a part-time basis. Through March 31, 2013, the Company also has a verbal arrangement with an independant contractor that administered our operations at the Caughlin Club. We had retained on a verbal, independent contractor basis tennis instructors as needed to teach lessons at the Caughlin Club and at the tennis camp at Reno High School. At the present time we have no instructors nor need for contract personnel. The peak of our summer tennis season extends for approximately nine weeks beginning the third week of June and ending after the second week of August.
Thermal has had discussions with private facilities, city, parks and recreation officials and high schools to manage tennis complexes both seasonally and year round. However, there is no guarantee we will succeed in obtaining management contracts from these sources.
Strategy
Our strategy for growth is an on-going process of negotiating contracts with tennis facilities and other athletic complexes. Despite our efforts, our current clientele in the past consisted of managing the tennis operations at one club. This contract was terminated March 31, 2013 by the Company. In addition, in 2012 and 2011 we operated a summer program on the tennis courts of Reno High School. The summer program at Reno High School for 2012 consisted of operating a tennis camp for kids, or basically teaching tennis lessons to children, on the tennis courts of Reno High School beginning June 11, 2012 and concluding July 30, 2012. The Company charged the participants for the tennis lessons. At the conclusion of the summer program the Company made a donation to the Reno High School Girls' Tennis Team and/or the tennis court repair account. In 2011, we paid Reno High School $1,080 for the use of its tennis courts for our summer program. This was a set fee negotiated prior to beginning of the 2011 summer program which turned out to be approximately 10% of the gross revenue we received. For 2012, Reno High School did not require a set fee but will accept any donation we chose to make. We made a donation for 2012 of $500 to the Reno High School Girls' Tennis Team. Due to prior commitments, the Company did not run or participate in the Reno High School Girls’ Tennis Team instructions during 2013.
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Marketing
Demographic trends have helped drive the growth experienced by the fitness industry over the past decade. The fitness industry including sports, exercise, dieting, and all things related to health and wellness, has benefited from the aging of the “baby boomer” generation and the coming of age of their offspring, the “echo boomers” (ages nine to 27). Government-sponsored reports, such as the Surgeon General’s Report on Physical Activity & Health (1996) and the Call to Action to Prevent and Decrease Overweight and Obesity (2001), have helped to increase the general awareness of the benefits of physical exercise to these demographic segments over those of prior generations. Membership penetration (defined as persons who have met the requirements of membership in a fitness related club through the payment of dues and any other requirements of membership, as a percentage of the total U.S. population over the age of six) has increased significantly from 11.0% in 1996 to 15.5% in 2005, according to the IHRSA/ American Sports Data Health Club Trend Report. However, it is unclear whether these trends have affected the tennis industry in Northern Nevada. In addition, club membership may have in fact declined since 2005 and may decline in the future.
Thermal Tennis is a registered provider of the United States Tennis Association’s 10 and Under Tennis program using the training methods for this beginning program. We believe the local communities want to provide activities for its citizens. Thermal wants to bring these two (2) desires together and serve the tennis community in this way.
Competition
Our business is to manage tennis facilities located in resorts and other locations having tennis venues. Most tennis venues employ a tennis professional to direct their tennis operations. Our challenge is to demonstrate that a professional tennis management company such as Thermal Tennis can better and more economically administer a tennis facility than full time staff people. At this time there is only one tennis facility that had chosen to use our services as opposed to directly employing a tennis professional. This contract was terminated on March 31, 2013. Our CEO, Mr. Deller, has personally spoken with an administrator at every tennis facility in the Northern Nevada and Lake Tahoe areas and none have suggested that other tennis management companies are also seeking their business. Accordingly, to our knowledge there are no other tennis management companies that complete for this business in the Northern Nevada and Lake Tahoe areas.
We also conducted summer tennis programs using high school tennis facilities. No programs were run or assisted with during 2013. Mr. Deller has spoken with the tennis coach at each high school in the Northern Nevada and Lake Tahoe areas. None have suggested that there are others seeking to run summer programs on their facilities. Therefore, we know of no other tennis management company seeking this business in Northern Nevada or Lake Tahoe.
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Distribution Methods of the Products or Services
None; not applicable.
Status of any Publicly Announced New Product or Service
None; not applicable.
Competitive Business Conditions and the Small Business Issuer’s Competitive Position in the Industry and Methods of Competition
None; not applicable
Sources and Availability of Raw Materials and Names of Principal Suppliers
None; not applicable.
Dependence on One or a Few Major Customers
None; not applicable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration
None; not applicable.
Need for any Governmental Approval of Principal Products or Services
None; not applicable.
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Effect of Existing or Probable Governmental Regulations on the Business
We are subject to the Sarbanes-Oxley Act of 2002. This Act creates a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; prohibits certain insider trading during pension bund blackout periods; and establishes a federal crime of securities fraud, among other provisions.
Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the Securities and Exchange Commission regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to stockholders of our Company at a special or annual meeting thereof or pursuant to a written consent will require our Company to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the Securities and Exchange Commission at least 10 days prior to the date that definitive copies of this information are forwarded to our stockholders.
We are also required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the Securities Exchange Commission on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K.
If we are acquired by a non-“reporting issuer” under the Exchange Act, we will be subject to the “back-door registration” requirements of the Securities and Exchange Commission that will require us to file a Current Report on Form 8-K12G3 that will include all information about such non-“reporting issuer” as would have been required to be filed by that entity had it filed a Form 10 or Form S-1 Registration Statement with the Securities and Exchange Commission. The Securities and Exchange Commission proposed on April 13, 2004, that any acquisition that will result in our Company no longer being a “blank check” or “blind pool” company will require us to include all information about the acquired company as would have been required to be filed by that entity had it filed a Form 10 or Form S-1 Registration Statement with the Securities and Exchange Commission.
Research and Development Costs During the Last Two Fiscal Years
None; not applicable.
Cost and Effects of Compliance with Environmental Laws
None; not applicable. However, environmental laws, rules and regulations may have an adverse effect on any business venture viewed by our Company as an attractive acquisition, reorganization or merger candidate, and these factors may further limit the number of potential candidates available to our Company for acquisition, reorganization or merger.
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Number of Total Employees and Number of Full Time Employees
Thermal Tennis has had no full-time employees since its organization. Robert R. Deller, our executive officer and director has served as a part-time employee of Thermal Tennis for the past fiscal year. All other workers engaged to fulfill the Company’s prior contract have been hired on an outside contractor basis. We anticipate that, at such time, if ever, as our financial position permits, assuming that we are successful in raising additional funds through equity and/or debt financing and/or generating a sufficient level of revenue from operations, Mr. Robert R. Deller and any other executive officers and/or directors of Thermal Tennis will receive reasonable salaries and other appropriate compensation, such as bonuses, coverage under medical and/or life insurance benefits plans and participation in stock option and/or other profit sharing or pension plans, for services as our executive officers and may receive additional fees for their attendance at meetings of the Board of Directors. Further, we may pay consulting fees to persons who perform services for us, although we have no present plans to do so.
Reports to Security Holders
You may read and copy any materials that we file with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports that we have filed electronically with the Securities and Exchange Commission at their Internet site www.sec.gov.
During the fiscal year ended December 31, 2013, we did not provide to our shareholders any annual report, proxy statement or information statement nor do we have any plans at the present time to provide any such report or reports to our shareholders.
Item 1A.
Item 1A. Risk Factors
Thermal Tennis may cease as a going concern.
The report of our independent registered public accounting firm points out that the Company has suffered recurring losses from operations and its total liabilities exceed its total assets. The auditors believe this raises substantial doubt about the Company’s ability to continue as a going concern. In this event, it is possible that investors would lose their investments.
We have a history of operating losses and anticipate future operating losses until such time as we can generate additional sales.
Since beginning operations, we have sustained operating losses. Even though we have generated revenues in the past, we have never been able to sustain business operations solely from business revenues. In addition, we expect to accelerate our losses in the future as we increase our expenses by developing and rolling out new management concepts to generate sales.
If we do not obtain additional funding as needed, we may be unable to fund our business operations and to adequately pursue our business plan.
Our business plan requires ongoing expenditures for the marketing of our products and services. It is likely we will need additional outside funding sources in the future to continue the development and the promotion of our business. If we are not successful in obtaining additional funding for operations if and when needed, we may have to discontinue some or all of our business activities and our stockholders might lose all of their investment.
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If we raise money through the sale of equity capital, it will dilute the holdings of existing shareholders.
As of December 31, 2013, we need outside funding sources to meet our financial obligations. For the next year, we intend to meet our financial obligations by borrowing money. If by December 31, 2014, we are unable to sustain our operations with business revenue, we may decide to meet our obligations through the sale of equity capital, we will be issuing stock to new investors which will increase the total numbers of shares of stock that are issued and outstanding. Accordingly, current shareholders will have their ownership of the Company diluted because following the offering they will own a smaller overall percentage of the Company.
The general economic downturn may have a significant impact on our financial condition and operating results.
In recent years, economic conditions have deteriorated in the United States and may remain depressed for the foreseeable future. These conditions make it difficult for us to accurately forecast and plan future business activities. Furthermore, during challenging economic times, we may face issues gaining access to financings or capital infusion, which could result in an impairment of our ability to continue our business activities. We cannot predict the duration of the current economic slowdown or any subsequent recovery in the United States or in our industry. Playing tennis on a recreational basis is typically considered a luxury rather than a necessity. In an economic downturn, many persons that would otherwise pursue the recreational playing of tennis may of necessity use their limited resources for other purposes making it difficult for us to grow tennis facility memberships for our clients. The current downturn makes it more difficult for our clients to prosper and accordingly more difficult for us to achieve financial viability as a business. Under this set of circumstances, it is less likely our stockholders will receive a return on their investments.
If we fail to convince the market place that we have superior products and services, we will not be commercially successful.
Even if we are successful in offering services superior to those of our competitors, it will be necessary for us to educate and convince the market place of that superiority. If we are unable to do so, we will not be able to achieve the market penetration necessary to become commercially successful and our investors may lose their investments.
If we cannot retain or hire qualified personnel, our programs could be delayed.
We are dependent on our president and the loss of his services could disrupt our business activities. We believe that our future success will depend in large part upon our ability to attract and retain highly skilled tennis professionals. We face intense competition for these kinds of personnel from other companies and organizations. We might not be successful in hiring or retaining the personnel needed for success.
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Because our sole employee occupies all corporate positions, it may not be possible to have adequate internal controls.
Bookkeeping procedures in the business context normally require that cash expenditures by a company and other liquid assets be under dual control. This provides that no expenditure is approved and made by the same person thereby preventing one person from taking wrongful advantage of the cash and/or other liquid resources of the Company. In cases where accounting dual control does not exist, Generally Accepted Accounting Principles considers the internal controls of the company to have a material weakness. Having only one employee also gives us the inability to provide effective oversight and review of financial transactions with regard to accumulating and compiling financial data in the preparation of financial statements. Because we lack sufficient accounting personnel, we also lack the accounting technical expertise necessary for an effective system of internal control.
Because our sole employee can unilaterally set his salary and potentially pay bonuses, he is in a position to deflect net operating revenue to himself rather than have the revenue remain in the Company or pay dividends on our common stock.
A sole officer, director and employee is in a position to set his own salary and to pay himself bonuses without input from other interested parties. If and when our revenues grow, the possibility exists for our sole employee to simultaneously increase his remuneration. This would prevent the accumulation of funds that could be used to pay cash dividends to our common shareholders. Accordingly, our shareholders may not receive the return, if any, on their investment in our Company that they had anticipated.
The expense of being a public company could prevent us from being competitive within our industry.
Thermal Tennis is public company having the burden of filing audited financial statements annually and reviewed financial statements quarterly with the Securities and Exchange Commission. In addition, there are also other reporting requirements. Considerable legal and auditing expense is incurred in meeting these reporting requirements. Our estimated costs resulting from being a public company total approximately $35,000 annually. Because other tennis management companies may not be public companies and thereby not be under the financial burden that it brings, we may not be able to compete with these companies on a business basis within the tennis industry.
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Investors will be unable to sell their securities if no market develops for those securities.
As of December 31, 2013, no market exists for our common shares. Even though we intend to create a public market for our common shares, there can be no assurance when the market will develop or if the market will ever develop. If we are not successful in developing a market for our common shares, investors in our company will not be able to sell their securities.
In the event our common stock has a market price below $5.00 per share, the stock will be subject to the “penny stock” rules of the SEC which could make transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to Thermal Tennis, as any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
• that a broker or dealer approve a person’s account for transactions in penny stocks; and
• the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
• obtain financial information and investment experience objectives of the person; and
• make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form:
• sets forth the basis on which the broker or dealer made the suitability determination; and
• that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of Thermal Tennis’ common stock and cause a decline in the market value of our common stock.
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Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Our business is seasonal which can make it difficult to sustain operating revenue throughout the year.
Tennis is played more in the summer months making our business a seasonal business. Because of this it is likely that we may not have the business revenue during the winter months necessary to pay expenses that may occur in the winter months thereby increasing the likelihood that our business will fail.
Thermal Tennis has accumulated debts which it may not be able to repay.
To sustain its business operations, the Company has borrowed money that as of December 31, 2013, totals $149,000 and has accrued interest as of that date of $44,026. In the event the Company is not able to repay this debt, it will become difficult if not impossible for the Company to continue its business operations and to continue to develop its business plan, in which event investors in the Company will likely lose their investments.
Item 1B.
Item 1B. Unresolved Staff Comments
None
Item 2.
Item 2. Properties
Thermal Tennis maintains its offices pursuant to a verbal arrangement rent at $250 per month at the residence of Ms. Robert R. Deller, President/Secretary/Treasurer and a director of Thermal Tennis, located at 4950 Golden Springs Drive, Reno, Nevada, 89509. Thermal Tennis' present office arrangement, which is expected to be adequate to meet our needs for the foreseeable future, has been valued by management at a nominal value and, accordingly, does not impact the accompanying Financial Statements of Thermal Tennis. Thermal Tennis' telephone and facsimile number is (775) 560-6659.
Item 3.
Item 3. Legal Proceedings
The Company is not a party to any pending legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. No director, executive officer or affiliate of the Company or owner of record or beneficially of more than five percent of the Company’s common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.
Item 4.
Item 4. Mine Safety Disclosures
N/A
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PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
There is no “established trading market” for our shares of common stock. We are listed on the OTC Bulletin Board of the Financial Industry Regulatory Authority (“FINRA”) under the trading symbol TTNS. Management does not expect any established trading market to develop unless and until we have material operations. In any event, no assurance can be given that any market for our common stock will develop or be maintained. If a public market ever develops in the future, the sale of “unregistered” and “restricted” shares of common stock pursuant to Rule 144 of the Securities and Exchange Commission by members of management or others may have a substantial adverse impact on any such market. All of these persons have satisfied the six-month holding period requirement of Rule 144. Our stock trades on a limited basis and the high and low bid prices to report are listed below.
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Securities Authorized for Issuance Under Equity Compensation Plans
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
We did not issue any unregistered securities during the calendar year ended December 31, 2013.
Holders
The number of record holders of the Company’s common stock as of the date of this Report is approximately 45, not including an indeterminate number who may hold shares in “street name.”
Dividends
Holders of shares of common stock are 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 out of funds legally available therefore. We have not paid any dividends on our common stock and intend to retain earnings, if any, to finance the development and expansion of our business. Future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors, including future earnings, capital requirements and the financial condition of Thermal Tennis.
Securities Authorized for Issuance under Equity Compensation Plans
We have no equity compensation plans.
Recent Sales of Unregistered Securities
During the last three years we have not issued any unregistered securities.
Purchases of Equity Securities by Us and Affiliated Purchasers
There have been no purchases of equity securities by us and no affiliated purchases.
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Item 6.
Item 6. Selected Financial Data
Not required for smaller reporting companies.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS.
This form 10-K contains forward-looking statements. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Forward-looking statements usually contain the words "estimate," "anticipate," "believe," "expect," or similar expressions, and are subject to numerous known and unknown risks and uncertainties. In evaluating such statements, prospective investors should carefully review various risks and uncertainties identified in this Report, including the matters set forth in the Company's other SEC filings. These risks and uncertainties could cause the Company's actual results to differ materially from those indicated in the forward- looking statements. The Company undertakes no obligation to update or publicly announce revisions to any forward-looking statements to reflect future events or developments.
Although forward-looking statements in this prospectus reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. We will file reports with the Securities and Exchange Commission ("SEC"). We shall make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such materials with or furnish them to the SEC. You can read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800- SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this annual filing. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this annual report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects.
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For the fiscal years ended December 31, 2013 and 2012
During the last two years we have not generated significant revenues and have realized a net loss from operations. We generated revenues in 2013 of $10,927 versus $97,499 for the year ended December 31, 2012. The substantial decrease in revenues was due to the Company terminating its one contract on March 31, 2013. The Company’s net loss during the years ended December 31, 2013 and 2012 were $47,073 and $59,719. The reason for the decrease in the loss was due to the reduction in additional administrative costs to list the Company’s stock onto the OTC.BB markets from 2012 to 2013. Until additional clients are obtained, the Company expects that it will continue to generate operating losses.
The cost of sales for 2013 was $9,360 versus $92,156 for 2012. The gross profit was $1,567 for 2013 versus $5,343 for 2012. The operations in both years provided minimal cash flows to cover its general and administrative expenses.
General and administrative expenses for the years ended December 31, 2013 and 2012 were $35,168 and $55,092, respectively. The major decrease in the general and administrative expenses were due to a reduction of additional costs related to the change in reporting requirements and professional fees incurred in the attempt to list the company’s securities onto the OTC Markets. We filed an S-1 during 2008 and it became effective July 24, 2008. We expected that these offering proceeds would have satisfied our cash requirements for at least a year and that it would not have been necessary, during that period, to raise additional funds to meet the expenditures required for operating our business. However, certain parties have lent $25,000 and $40,000 in 2013 and 2012, and additional funds will be needed to continue on its limited operations. We do not anticipate the performance of any research and development during the next 12 months.
There can be no assurance that we will achieve commercial acceptance for any of our proposed tennis services in the future; that future service revenue will materialize or be significant; that any sales will be profitable; or that we will have sufficient funds available for further development of our proposed services. The likelihood of our success will also depend upon our ability to raise additional capital from equity and/or debt financing to overcome the problems and risks described herein; to absorb the expenses and delays frequently encountered in the operation of a new business; and to succeed in the competitive environment in which we will operate. Although management intends to explore all available alternatives for equity and/or debt financing, including, but not limited to, private and public securities offerings, there can be no assurance that we will be able to generate additional capital. Our continuation as a going concern is dependent on our ability to generate sufficient cash flow to meet our obligations on a timely basis and, ultimately, to achieve profitability.
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Financial Condition, Capital Resources and Liquidity
As of December 31, 2013, we had total cash assets of $3,139, which was derived from operations and loans made to the company. We had total current liabilities of $211,711 and working capital deficit of $208,572, and a stockholders' deficit of $208,572 as of December 31, 2013. Deficits accumulated during the history of the company have totaled $206,503. Our financial statements are presented on the basis that Thermal Tennis is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. However, our independent accountants have noted that the Company has accumulated losses from operations and has the need to raise additional financing in order to satisfy its vendors and other creditors and execute its business plan. These factors raise substantial doubt about our ability to continue as a going concern. Our future success will be dependent upon our ability to provide effective and competitive tennis services that meet customers' changing requirements. Should Thermal Tennis' efforts to raise additional capital through equity and/or debt financing fail, Robert Deller, our President/Secretary/Treasurer, is expected to provide the necessary working capital so as to permit Thermal Tennis to continue as a going concern.
At December 31, 2013 the Company had minimal operations and was obtaining additional debt in order to continue current operations. At December 31, 2013 and through the date of this filing, the Company has yet to obtain any other commitments for additional funding. In the years ended December 31, 2013 and 2012, the Company received $25,000 and $40,000 in proceeds from debt. The Company expects it will have to borrow additional funds against its credit lines to sustain operations until the offering of its securities is completed.
Until the Company obtains the capital required to develop any properties or businesses and obtains the revenues needed from its future operations to meet its obligations, the Company will depend on sources other than operating revenues to meet its operating and capital needs. Operating revenues may never satisfy these needs.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not Required.
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Item 8.
Item 8. Financial Statements and Supplementary Data.
Thermal Tennis Inc.
Financial Statements as of December 31, 2013 and 2012
and for the years ended December 31, 2013 and 2012
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Page
Report of Independent Registered Public Accounting Firm 20
Balance Sheets-December 31, 2013 and 2012 21
Statements of Operations for the years ended December 31, 2013
and 2012 22
Statements of Stockholders' Deficit for the years ended
December 31, 2013 and 2012 23
Statements of Cash Flows for the years ended December 31, 2013
and 2012 24
Notes to Financial Statements 25-32
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Thermal Tennis, Inc.
Reno, Nevada
We have audited the accompanying balance sheets of Thermal Tennis, Inc. as of December 31, 2013 and 2012, and the related statements of operations, stockholders' deficit, and cash flows for each of the years 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 audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 Thermal Tennis, Inc. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations, and its total liabilities exceed its total assets. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ HJ & Associates, LLC
HJ & Associates, LLC
Salt Lake City, Utah
February 28, 2014
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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THERMAL TENNIS INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 - Organization, History and Business Activity
Thermal Tennis Inc. (Company) was founded July 1, 1999 and was organized to engage in the business of namely the development of tennis management programs, tennis training programs, sales of tennis equipment and general services related to tennis. The Company was incorporated under the laws of the State of Nevada.
NOTE 2 - Significant Accounting Policies
This summary of significant accounting policies of Thermal Tennis Inc. (the “Company”) is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
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.
Concentration of Risk
The Company places its cash and temporary cash investments with established financial institutions.
Accounts Receivable
Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. The Company reserved $0 as a bad debt reserve for the years ended December 31, 2013 and 2012, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
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Fair Value of Financial Instruments
Effective January 1, 2008, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures, Pre Codification SFAS No. 157, “Fair Value Measurements”, which provides a framework for measuring fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices for identical assets and liabilities in active markets;
Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The Company designates cash equivalents (consisting of money market funds) and investments in securities of publicly traded companies as Level 1. The total amount of the Company’s investment classified as Level 3 is de minimis.
The fair value of the Company’s debt as of December 31, 2013 and 2012, approximated fair value at those times.
Fair value of financial instruments: The carrying amounts of financial instruments, including cash and cash equivalents, short-term investments, accounts payable, accrued expenses and notes payables approximated fair value as of December 31, 2013 and 2012 because of the relative short term nature of these instruments. At December 31, 2013 and 2012, the fair value of the Company’s debt approximates carrying value.
Shares for Services and Other Assets
The Company accounts for stock-based compensation based on the fair value of all option grants or stock issuances made to employees or directors on or after its implementation date, as well as a portion of the fair value of each option and stock grant made to employees or directors prior to the implementation date that represents the unvested portion of these share-based awards as of such implementation date, to be recognized as an expense, as codified in ASC 718. The Company calculates stock option-based compensation by estimating the fair value of each option as of its date of grant using the Black-Scholes option pricing model. These amounts are expensed over the respective vesting periods of each award using the straight-line attribution method. Compensation expense is recognized only for those awards that are expected to vest, and as such, amounts have been reduced by estimated forfeitures.
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Revenue Recognition
The Company recognizes revenue in accordance with the Securities and Exchange Commission Staff Accounting Bulletin (SAB) number 104, which states that revenues are generally recognized when it is realized and earned. Specifically, the Company recognizes revenue when services are performed and projects are completed and accepted by the customer. Revenues are earned from tennis lessons, sales of ball machines and other related services.
Income Taxes
The Company accounts for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Company’s balance sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The Company must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance. Changes in the Company’s valuation allowance in a period are recorded through the income tax provision on the consolidated statements of operations.
On January 1, 2007, the Company adopted ASC 740-10. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.
Segments
The Company operates in only one business segment, namely the development of tennis management programs, tennis training programs, sales of tennis equipment and general services related to tennis.
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Earnings Per Share
The Company is required to provide basic and dilutive earnings per common share information.
The basic net loss per common share is computed by dividing the net earnings applicable to common stockholders by the weighted average number of common shares outstanding.
Diluted net income per common share is computed by dividing the net income applicable to common stockholders, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities.
For the period ended December 31, 2013 and 2012, there were no dilutive securities that would have had an anti-dilutive effect and all the shares outstanding were included in the calculation of diluted net income per common share.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB, the American Institute of Certified Public Accountants ("AICPA"), and the SEC did not or are not believed by management to have a material impact on the Company's present financial statements.
NOTE 3 - Financial Condition and Going Concern
The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated a net loss from its operations in 2013, the Company has a Accumulated Deficit, and a Stockholders’ Deficit. These factors raise substantial doubt as to its ability to obtain debt and/or equity financing and achieving future profitable operations.
Management intends to raise additional operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors. Ultimately, the Company will need to achieve profitable operations in order to continue as a going concern.
There are no assurances that Thermal Tennis Inc. will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to Thermal Tennis Inc.. If adequate working capital is not available Thermal Tennis Inc. may be required to curtail its operations.
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NOTE 4 - Income Taxes
Effective January 1, 2007, we adopted the provisions of ASC 740-10. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740-10 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The application of income tax law is inherently complex. Laws and regulation in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding the income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes in the subjective assumptions and judgments can materially affect amounts recognized in the balance sheets and statements of income.
At the adoption date of January 1, 2007, we had no unrecognized tax benefit, which would affect the effective tax rate if recognized. There has been no significant change in the unrecognized tax benefit during the year ended December 31, 2013.
We classify interest and penalties arising from the underpayment of income taxes in the statement of income under general and administrative expenses. As of December 31, 2013, we had no accrued interest or penalties related to uncertain tax positions. The tax years 2010-2013 federal returns remain open to examination.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
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The provision (benefit) for income taxes for the year ended December 31, 2013 and 2012 consists of the following:
Net deferred tax assets consist of the following components as of December 31, 2013 and 2012:
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rate of 34% to pretax income from continuing operations of the years ended December 31, 2013 and 2012 due to the following:
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NOTE 5 - Notes Payable
The Company’s notes payable consists of the following:
Future maturities of notes payable are as follows:
Years Ending December 31:
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NOTE 6 - Notes Payable-Related Parties
The Company’s notes payable to related parties consists of the following:
Future maturities of long-term debt to related parties are as follows:
Years Ending December 31:
(1)
The notes listed above represent credit lines that allow the Company to borrow up to $25,000 on each note to pay the ongoing expenses of the company.
(2)
The lender made the additional loan above the original terms and conditions of the note without amending the credit line.
NOTE 7 - Related Party Transactions
The Company recognized $3,000 of expense in 2013 and 2012, which represented the value of the rent associated with the sole officer’s home office
The President provided certain contract services in 2013 and 2012 and was paid $0 and $4,822 for these services, respectively.
The Company accrued interest expense on the notes listed in Note 6 in the amount of $9,364 and $8,084 for the years ended December 31, 2013 and 2012, respectively. The total interest owed at December 31, 2013 on the related party notes amounts to $38,917.
The President of the Company loaned in the year ended December 31, 2012, as described in Note 6 under notes payable-related parties, $20,000 that is due July 1, 2014 with interest at 10%.
The President of the Company loaned in the year ended December 31, 2013, as described in Note 6 under notes payable-related parties, $10,000 that is due July 1, 2014 with interest at 10%.
NOTE 8 - Subsequent Events
The Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there is the following subsequent event to disclose.
Subsequent to the end of the fiscal year ended December 31, 2013, the Company borrowed $25,000 from Cohort Capital L.L.C., a Nevada limited liability company. Interest accrues on the loan at the rate of 10% per annum. All principal and interest is due and payable on July 1, 2014.
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Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A.
Item 9A. Controls and Procedures.
Under the supervision and with the participation of our management, including our chief executive officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our chief executive officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding disclosure. A discussion of the material weaknesses in our controls and procedures is described below.
Management’s Annual Report on Internal Control over Financial Reporting.
Our management, which consists of Robert R. Deller, president and chief accounting officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management, including our sole executive and accounting officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation, our management concluded that there are multiple material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified are primarily due to insufficient personnel in the finance department which results in an inability to provide effective oversight and review of financial transactions with regard to accumulating and compiling financial data in the preparation of financial statements. The lack of sufficient personnel also results in a lack of segregation of duties and the accounting technical expertise necessary for an effective system of internal control.
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We have begun to take steps to mitigate this material weakness to the fullest extent possible. As soon as our finances allow, we plan on hiring additional finance staff and, where necessary, utilizing competent outside consultants to provide a layer of review and technical expertise that is currently lacking in our internal controls over financial reporting.
Based on our evaluation under the frameworks described above, our management has concluded that our internal control over financial reporting was not effective as of December 31, 2013.
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
During the most recent fiscal year ended December 31, 2013, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9(B). Other Information.
None.
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PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
Identification of Directors and Executive Officers
The following table sets forth the names of all current directors and executive officers of the Company. These persons will serve until the next annual meeting of the stockholders or until their successors are elected or appointed and qualified, or their prior resignation or termination.
Name
Positions Held
Date of Election or Designation
Date of Termination or Resignation
Robert R. Deller
President
Secretary
Treasurer
08/99
08/99
08/99
*
*
*
Director
08/99
*
* These persons presently serve in the capacities indicated.
Business Experience
Our sole officer is Robert R. Deller. As such, Mr. Deller is our President, Principal Executive Officer, Principal Accounting Officer, Principal Financial Officer, Secretary and Treasurer. Mr. Deller is also our sole director. Mr. Deller is 59 years old.
Mr. Deller became an officer and a director of Thermal Tennis at is inception on August 25, 1999. His primary occupation from January, 2001 through January, 2006, was Tennis Director, at the Caughlin Club in Reno, Nevada. From January, 2006, through the present, Mr. Deller is a marketing representative for California Products Corp., a manufacturer of tennis surfacing materials.
Significant Employees
The Company has no employees who are not executive officers, who are expected to make a significant contribution to the Company’s business.
Family Relationships
There are no family relationships between our officers and directors.
Involvement in Certain Legal Proceedings
Except as stated above, during the past five years, no director, person nominated to become a director, executive officer, promoter or control person of the Company:
(1) was a general partner or executive officer of any business against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
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Section 16(a) Beneficial Ownership Reporting Compliance
Each person who, at any time during the fiscal year ended December 31, 2013, was a director, officer or beneficial owner of more than 10% of our common stock includes Robert R. Deller, Jeff W. Holmes and Ascendiant Capital. During the fiscal year ended December 31, 2013, each of these persons or entities failed to file a Form 3. During the fiscal year there were no transactions that were not reported.
Code of Ethics
The Company adopted a Code of Ethics that is filed as exhibit 14.1 to our Annual Report on Form 10K for our fiscal year ended December 31, 2008, filing with the Securities and Exchange Commission on March 30, 2009.
Nominating Committee
We have not established a Nominating Committee because, due to our lack of substantial operations and the fact that we only have two directors and executive officers, we believe that we are able to effectively manage the issues normally considered by a Nominating Committee. Following an increase in our current operations, a further review of this issue will no doubt be necessitated and undertaken by our management.
Audit Committee
We have no audit committee, and we are not required to have an audit committee; we do not believe the lack of an audit committee will have any adverse effect on our financial statements, based upon our current business operations. We will assess whether an audit committee may be necessary in the future.
Item 11.
Item 11. Executive Compensation
The following table sets forth the aggregate compensation paid by the Company for services rendered during the periods indicated:
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SUMMARY COMPENSATION TABLE
During 2013, we paid no salary to any officer or director of the Company. The only amount paid to Mr. Deller was $0 and $4,822 for 2013 and 2012 for teaching certain lessons on the one contract the Company previously fulfilled.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners
The following tables set forth the share holdings of those persons who were principal shareholders of the Company’s common stock as of the dated of this Report.
Ownership of Principal Shareholders
Security Ownership of Management
The following table sets forth the share holdings of the Company’s directors and executive officers as of December 31, 2013:
Ownership of Officers and Directors
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Changes in Control
There are no additional present arrangements or pledges of the Company’s securities, which may result in a change in control of the Company.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Transactions with Related Persons
The Company currently utilizes office space on a month to month basis at $250 per month from a shareholder, and shall do so until substantial revenue-producing operations commence.
Except for as noted above, there were no material transactions, or series of similar transactions, during our Company’s last fiscal year, or any currently proposed transactions, or series of similar transactions, to which our Company or any of our subsidiaries was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or one percent of the average of the small business issuer’s total assets at year-end for the last three completed fiscal years and in which any director, executive officer or any security holder who is known to us to own of record or beneficially more than five percent of any class of our common stock, or any member of the immediate family of any of the foregoing persons, had an interest.
Transactions with Promoters and Control Persons
There were no material transactions, or series of similar transactions, during our Company’s last five fiscal years, or any currently proposed transactions, or series of similar transactions, to which we or any of our subsidiaries was or is to be a party, in which the amount involved exceeded $60,000 and in which any promoter or founder of ours or any member of the immediate family of any of the foregoing persons, had an interest.
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Item 14.
Item 14. Principal Accounting Fees and Services
The Following is a summary of the fees billed to the Company by its principal accountants during the fiscal years ended December 31, 2013 and 2012:
Audit Fees - Consists of fees for professional services rendered by our principal accountants for the audit of the Company’s annual financial statements and review of the financial statements included in the Company’s Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.
Audit-related Fees - Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit fees.”
Tax Fees - Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.
All Other Fees - Consists of fees for products and services provided by our principal accountants, other than the services reported under “Audit fees,” “Audit-related fees,” and “Tax fees” above.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The Company has not adopted an Audit Committee; therefore, there is no Audit Committee policy in this regard. However, the Company does not require approval in advance of the performance of professional services to be provided to the Company by its principal accountant. Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.
Item. 15. Exhibits
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THERMAL TENNIS INC.
By: /s/ Robert R. Deller
-----------------------------------------------------
Robert R. Deller, Chief Executive Officer
Date: February 28, 2014
In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Robert R. Deller
-----------------------------------------
Robert R. Deller, Director and
Principal Executive Officer
Principal Financial Officer
Date: February 28, 2014
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