Attached files
file | filename |
---|---|
EX-31 - HAVAYA CORP | v209646_ex31.htm |
EX-32 - HAVAYA CORP | v209646_ex32.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
þ ANNUAL REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December
31, 2010
or
¨
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from ______________ to ________________
Commission
file number 333-165083
HAVAYA
CORP.
|
(Exact
name of registrant as specified in its
charter)
|
Delaware
|
74-3245242
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer Identification No.)
|
|
51
Sheshet Hayamim St.,
Kfar
Saba, Israel
|
44269
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
1-800-878-5756
|
(Registrant’s
telephone number, including area
code)
|
Securities
registered pursuant to Section 12(b) of the Act:
|
||
N/A
|
N/A
|
|
Title
of each Class
|
Name
of each exchange on which
registered
|
Securities
registered pursuant to section 12(g) of the Act:
|
|
Shares of Common Stock, $0.0001 par
value
|
|
Title
of Class
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ¨ No
þ
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ¨ No
þ
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ¨ Accelerated
filer ¨ Non-accelerated
filer ¨ Smaller
reporting company þ
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes þ No ¨
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant was approximately $ 40,000 based upon the price
that our common stock was last sold which was $0.02. Shares of common stock held
by each officer and director and by each person or group who owns 10% or more of
them outstanding common stock amounting to 4,500,000 shares have been excluded
in that such persons or groups may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable
date.
6,500,000 shares of common
stock as of February 1, 2011.
DOCUMENTS
INCORPORATED BY REFERENCE
Exhibits
incorporated by reference are referred under Part IV.
TABLE
OF CONTENTS
Page
|
||
FORM
10-K
|
|
|
PART
I
|
1
|
|
ITEM
1.
|
BUSINESS
|
1
|
ITEM
1A.
|
RISK
FACTORS
|
5
|
ITEM
2.
|
PROPERTIES
|
11
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
11
|
ITEM
4.
|
REMOVED
AND RESERVED
|
11
|
PART
II
|
12
|
|
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
|
|
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
12
|
|
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
12
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
|
|
CONDITION
AND RESULTS OF OPERATIONS
|
12
|
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
17
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
|
|
ACCOUNTING
AND FINANCIAL DISCLOSURE
|
17
|
|
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
17
|
ITEM
9B.
|
OTHER
INFORMATION
|
18
|
PART III
|
19
|
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
19
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
21
|
ITEM
12.
|
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND
|
|
MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
|
21
|
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND
|
|
DIRECTOR
INDEPENDENCE
|
22
|
|
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
23
|
PART
IV
|
25
|
|
ITEM
15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
24
|
SIGNATURES
|
25
|
Forward
Looking Statements
This
annual report contains forward-looking statements within the meaning of Section
27A of the Securities Act
of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). These forward-looking statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as “may”, “should”,
“expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”,
“potential” or “continue” or the negative of these terms or other comparable
terminology. These forward-looking statements are only predictions and involve
known and unknown risks, uncertainties and other factors, including the risks
set out below, any of which may cause our or our industry’s actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements. These risks include, by way of
example and not in limitation:
|
·
|
risks
related to our ability to continue as a going
concern;
|
|
·
|
the
uncertainty of profitability based upon our history of
losses;
|
|
·
|
risks
related to failure to obtain adequate financing on a timely basis and on
acceptable terms for our planned development
projects;
|
|
·
|
risks
related to environmental regulation and
liability;
|
|
·
|
risks
related to tax assessments;
|
|
·
|
risks
and uncertainties related to our prospects, properties, and business
strategy; and
|
|
·
|
risks
related to the armed conflict in
Israel.
|
The above
list is not an exhaustive list of the factors that may affect any of our
forward-looking statements. These and other factors should be considered
carefully and readers should not place undue reliance on our forward-looking
statements.
Forward
looking statements are made based on management’s beliefs, estimates and
opinions on the date the forward-looking statements are made, and we undertake
no obligation to update forward-looking statements should these beliefs,
estimates and opinions or other circumstances change. Although we believe that
the expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these forward-looking statements to actual
results.
Our
financial statements are stated in United States dollars (“US$”) and are
prepared in accordance with United States generally accepted accounting
principles (“GAAP”).
In this
annual report, unless otherwise specified, all dollar amounts are expressed in
United States dollars and all references to "common stock" refer to the shares
of our common stock.
As used
in this annual report, the terms "we", "us", "our", "Havaya" and “Issuer” mean
Havaya Corp. unless the context clearly requires otherwise.
PART
I
ITEM 1.
|
BUSINESS
|
Form
and year of organization
We were
incorporated on November 21, 2007, in the State of Delaware. Our authorized
capital consists of 200,000,000 shares of our common stock (the “Common Shares”)
with a par value of $0.0001 per Common Share.
Our
principal executive offices are currently located at 51 Sheshet Hayamim St.,
Kfar Saba, 44269 Israel. Our telephone number is
1-800-878-5756.
Our
Common Shares are traded on the over-the-counter market and quoted on the
over-the-counter bulletin board (the “OTCBB”) under the symbol
“HVAY.OB”.
Bankruptcy,
Receivership or Similar Proceeding
We have
never declared bankruptcy, have never been in receivership, and have never been
involved in any legal actions or proceedings.
Recent
Corporate Developments
In May
2010, we entered into a supply and fulfillment agreement with Pacific Naturals
for the supply of teeth whitening kits and fulfillment of orders from our
customers. Our agreement with Pacific Naturals is not exclusive and Pacific
Naturals has other distributors in our target market selling the same product
that we intend to offer, albeit under a different name. We do not expect to
obtain any exclusive arrangement with our suppliers. Since we plan to private
label the teeth whitening kits, we will be promoting the Havaya brand, which
will be exclusive to us.
In
December 2009 we entered into preliminary discussions with a production company
regarding producing an infomercial, as well as with a graphic design company to
produce labels and packaging for our teeth whitening kit. We have not executed
an agreement with the production company due to our current need to conserve
funds until we raise additional cash.
Business
of Issuer
Principal
Products and Markets
We are a
development stage company that was incorporated on November 21, 2007. We have
commenced only limited operations, primarily focused on researching potential
suppliers and fulfillment centers.
We have
not generated any revenue to date and we do not expect to generate revenues
prior to the third quarter of 2011. We do not currently have sufficient capital
to operate our business, and, we will require additional funding in the future
to sustain our operations. There is no assurance that we will have revenue in
the future or that we will be able to secure the necessary funding to develop
our business.
We intend
to engage in the marketing and sale of a teeth whitening product for sale online
and through a fulfillment center (1-800 telephone number) with delivery via
commercial ground/air services direct to the consumer.
Our
offices are currently located at 51 Sheshet Hayamim St., Kfar Saba, 44269,
Israel. Our telephone number is 1-800-878-5756. We do not currently have a
website; however we have reserved a domain name
(www.havayacorp.com).
We plan
to market and sell a private label teeth whitening product for the ‘home use’
market. We intend to resell a private label teeth whitening kit that will be
designed for use at home to provide the customer with all the necessary
equipment and gel to perform effective teeth whitening treatments. While the
products we plan to resell will be similar in content and effect to the products
of some of our competitors and to the products that potential suppliers sell
directly and through other distributors, we intend to retain a packaging
consultant and copywriter to assist us in differentiating our private label
product on the basis of packaging and an advertising campaign. We intend to
enter the market with a unique logo to supplement our slogan which is “White and
Bright, your smile is right!” In addition, we plan to design an outer box which
will fit our kits. We intend for the box to include a photo of a model with
sparkling white teeth. We expect that the teeth whitening kits will be comprised
of:
1
|
·
|
1
mouth tray for gel to be filled at home (containing lip guards and
breathable holes);
|
|
·
|
1 x
10cc gel tube for 20 applications (the gel tube has a shelf life of 12
months);
|
|
·
|
1 x
travel case (white box) to store the tray;
and
|
|
·
|
instructions.
|
Our
private label kits will be based on carbamide peroxide. The concentrate will be
in the range of 16% - 22%. To keep our overhead low, we intend to outsource our
manufacturing and logistics operations, and purchase the teeth whitening kits in
bulk from suppliers. The kits will arrive privately labeled from our suppliers
and will be sent directly to our fulfillment services provider. Our fulfillment
services provider will receive orders electronically and by telephone; provide
central warehousing facilities; handle payment and transaction processes; pick,
pack and ship products according to order specifications; handle delivery of
products to final destinations; and handle returns.
We intend
to have our own label affixed to each box kit. Each kit will have an instruction
manual which will explain to the customer the exact usage pattern and amount of
gel to apply. If our instructions are followed, then each kit should contain
enough gel for twenty applications. In addition, we plan to work with Just in
Time (JIT) inventory to minimize warehousing needs. As our inventory falls below
five hundred kits, we will place a re-order with our kit supplier. We plan to
market the kits through 15- and 30- second infomercials placed on cable TV
channels, as well as e-marketing through the internet. We intend to build our
brand name through our marketing strategy.
We will
initially resell our private label products through our cable TV campaign, as
well as through online advertising on internet web sites. Our advertising will
advertise a 1-800 telephone number from which customers may call our fulfillment
service provider. Delivery to the customer will take place via commercial
ground/air services.
According
to Forrester Research (US
Online Retail Forecast 2009 -2014 , March 5, 2010), U.S. online retail
sales grew by 11% in 2009 to reach $155.2 billion, and with a 10% compound
annual growth rate, US online retail sales are forecasted to reach $248.7
billion by 2014. Forrester Research estimated that by 2010, 13.8% of all
health and beauty sales will be made online.
In the
future, we intend to explore the possibility of selling kits to distributors
that supply retail outlets, such as drug stores, food outlets, and
supermarkets.
Our goal
is to be able to deliver our private label teeth whitening kits to the consumer
quickly. We plan to sell our private label products at a competitive price and
to back up our private label products with a money-back guarantee. We have
entered into a formal agreement with one supplier. We believe that on the basis
of this agreement and our discussions with other potential suppliers that we
will be able to order quantities of teeth whitening kits at prices that would
enable us to resell them at prices that will be competitive with comparable
products available in the market. We have conducted market research and are
familiar with the market prices for comparable kits. On May 5, 2010, we placed
an initial order for 100 teeth whitening kits from Pacific Naturals. On May 27,
2010, we received delivery of the ten teeth whitening kits that we directed be
shipped to our offices in Israel. All 100 kits have been paid for in
full.
Target
Market
With
today’s emphasis on longevity and pride of looks, the target market for our
products incorporates people of all ages, in all income ranges. However, we plan
to focus our marketing on women between the ages of 18 and 54 in the low, middle
and upper income groups.
Product
Pricing
We intend
to sell our private label kits online at a price of $29.99 plus a uniform charge
for shipment throughout the continental United States of $8.00 for shipping (an
additional charge of $2.00 will be added for shipping to Alaska and Hawaii),
which will be below most of our current competitors’ prices, and therefore
should be attractive to prospective customers.
2
Our
Competition
Three
major teeth whitening options are available today. All three rely on varying
concentrations of peroxide and varying application times. Subject to our maintaining
our current supply agreement with Pacific Naturals and entering into agreements
with other potential suppliers, our private label product is intended to have
the following benefits:
|
·
|
Safe
and easy to use at home;
|
|
·
|
16-22%
carbamide peroxide;
|
|
·
|
Moderately
priced;
|
|
·
|
Competitive
pricing;
|
|
·
|
Our
mouth-trays have breathable holes;
and
|
|
·
|
Nothing
artificial needs to be bonded to
teeth.
|
Many of
our competitors include or offer one or more of the benefits listed above, and
we intend to compete primarily on price and on our ability to market and fulfill
orders in an efficient manner.
Sources
and Availability of Products and Supplies
We plan
to purchase the basic teeth whitening product from one or two main suppliers,
with alternative suppliers for back-up purposes in case of stock
shortages. However, if we end up entering into supply contracts for our
private label teeth whitening kits with only one or two suppliers, then we may
become dependent upon such supplier(s) for the supply of all of our private
label products. By “basic teeth whitening product,” we mean that the products
will contain substantially the same ingredients, and any differences in the
products supplied by different suppliers would be minor and immaterial with
respect to their content and effectiveness. We may sell different teeth
whitening kits from different suppliers under the same private label in the
event we enter into agreements with additional suppliers. It is our intention
that these kits will not differ in appearance or in their ingredients, but
rather only the identity of the supplier of these kits will differ.
Dependence
on One or a Few Major Customers
The
nature of our product offering does not mandate any dependence on one or a few
major customers.
Patent,
Trademark, License & Franchise Restrictions and Contractual Obligations
& Concessions
We have
not entered into any franchise agreements or other contracts that have given, or
could give rise to, obligations or concessions. We intend to protect our teeth
whitening products on the basis of applicable trademark and tradename laws.
Beyond our trade name, we do not hold any other intellectual
property.
Existing
or Probable Government Regulations
The
marketing, distribution and sale of the private label teeth whitening kits that
we propose to sell will be subject to the requirements of federal
law. Among the federal laws which may impact us are the Federal Food,
Drug and Cosmetic Act. While the Food and Drug Administration (FDA)
currently classifies teeth whitening products as cosmetic products that are not
subject to FDA regulations, the products we plan to sell are subject to the
Federal Food, Drug and Cosmetic Act, which regulates the advertising, record
keeping, labeling, handling, storage and sale of cosmetics. W e are
not currently required to hold any licenses to conduct our business as presently
operated.
The
Federal Food, Drug and Cosmetic Act (“FDC Act”) regulates, among other things,
medical devices in the United States by classifying them into one of three
classes based on the extent of regulation believed necessary to ensure safety
and effectiveness. Class I devices are those devices for which safety and
effectiveness can reasonably be ensured through general controls, such as device
listing, adequate labeling, pre-market notification and adherence to the Quality
System Regulation (“QSR”) as well as medical device reporting, labeling and
other regulatory requirements. Some Class I medical devices are exempt from the
requirement of pre-market approval or clearance. Class II devices are those
devices for which safety and effectiveness can reasonably be ensured through the
use of special controls, such as performance standards, post-market surveillance
and patient registries, as well as adherence to the general controls provisions
applicable to Class I devices. Class III devices are devices that generally must
receive pre-market approval by the FDA pursuant to a pre-market approval
application (“PMA”) to ensure their safety and effectiveness. Generally, Class
III devices are limited to life sustaining, life supporting or implantable
devices; however, this classification can also apply to novel technology or new
intended uses or applications for existing devices.
3
Before
most medical devices can be marketed in the United States, they are required by
the FDA to secure either clearance of a pre-market notification pursuant to
Section 510(k) of the FDC Act (a “510(k) Clearance”) or approval of a PMA.
Obtaining approval of a PMA can take several years. In contrast, the process of
obtaining 510(k) Clearance generally requires a submission of substantially less
data and generally involves a shorter review period. Most Class I and Class II
devices enter the market via the 510(k) Clearance procedure, while new Class III
devices ordinarily enter the market via the more rigorous PMA procedure. In
general, approval of a 510(k) Clearance may be obtained if a manufacturer or
seller of medical devices can establish that a new device is “substantially
equivalent” to a predicate device other than one that has an approved PMA. The
claim for substantial equivalence may have to be supported by various types of
information, including clinical data, indicating that the device is as safe and
effective for its intended use as its legally marketed equivalent device. The
510(k) Clearance is required to be filed and cleared by the FDA prior to
introducing a device into commercial distribution. Market clearance for a 510(k)
Notification submission may take 3 to 12 months or longer. If the FDA finds that
the device is not substantially equivalent to a predicate device, the device is
deemed a Class III device, and a manufacturer or seller is required to file a
PMA. Approval of a PMA for a new medical device usually requires, among other
things, extensive clinical data on the safety and effectiveness of the device.
PMA applications may take years to be approved after they are filed. In addition
to requiring clearance or approval for new medical devices, FDA rules also
require a new 510(k) filing and review period prior to marketing a changed or
modified version of an existing legally marketed device if such changes or
modifications could significantly affect the safety or effectiveness of that
device. The FDA prohibits the advertisement or promotion of any approved or
cleared device for uses other than those that are stated in the device’s
approved or cleared application.
However,
we believe that our private label teeth whitening kits will not require a 510(k)
submission because teeth whitening products are classified as cosmetics and not
as medical devices, a nd fall within an exemption under the 510(k) regulation.
The FDA regulations identifying “cosmetic product categories” recognize that
“dentrifices,” “mouthwashes and breath fresheners,” and “other oral hygiene
products” may come within the definition of a cosmetic: 21 C.F.R.
§720.4I(9).
While we
believe we are and will be in substantial compliance with the laws and
regulations which regulate our business, the failure to comply with any of those
laws or regulations, or the imposition of new laws or regulations could
negatively impact our proposed business.
Research
and Development Activities and Costs
We have
not incurred any costs to date and have no plans to undertake research and
development activities during the next year of operation.
Costs and Effects of Compliance with
Environmental Laws and Regulations
We are
not in a business that involves the use of materials in a manufacturing stage
where such materials are likely to result in the violation of any existing
environmental rules and/or regulations. Further, we do not own any
real property that could lead to liability as a landowner. Therefore,
we do not anticipate that there will be any substantial costs associated with
the compliance of environmental laws and regulations.
Employees
As of
December 31, 2010, we have no employees. All functions, including
development, strategy, negotiations and administration, are currently being
provided by our Directors on a voluntary basis.
4
ITEM 1A.
|
RISK
FACTORS
|
Risk
Factors Relating to Our Company
We have a going concern opinion from
our auditors, indicating the possibility that we may not be able to continue to
operate.
We have
incurred net losses of $42,269 for the period from November 21, 2007 (date of
inception) through December 31, 2010. We anticipate generating losses for the
next 12 months. We do not anticipate generating revenues until the third
quarter of 2011. Therefore, we may be unable to continue operations in the
future as a going concern. No adjustment has been made in the accompanying
financial statements to the amounts and classification of assets and liabilities
which could result should we be unable to continue as a going concern. If we
cannot continue as a viable entity, our stockholders may lose some or all of
their investment in us.
In
addition, our independent auditors included an explanatory paragraph in their
report on the accompanying financial statements regarding concerns about our
ability to continue as a going concern. As a result, we may not be able to
obtain additional necessary funding. There can be no assurance that we
will ever achieve any revenues or profitability. The revenue and income
potential of our proposed business and operations are unproven, and the lack of
operating history makes it difficult to evaluate the future prospects of our
business.
We are a development stage company
and may never be able to execute our business plan.
We were
incorporated on November 21, 2007. We currently have no products, customers, or
revenues. Although we have begun initial planning for the marketing and
reselling of teeth whitening kits with our private label, we may not be able to
execute our business plan unless and until we are successful in raising
additional funds. We anticipate that we will require additional financing to
continue our operations and to remain operational during the next twelve months,
and that we will require additional financing in order to establish profitable
operations. Such financing, if required, may not be forthcoming. Even
if additional financing is available, it may not be available on terms we find
favorable. Failure to secure the needed additional financing will have a serious
effect on our company's ability to survive. At this time, there are no
anticipated additional sources of funds in place, except for a commitment by our
Directors to loan us up to $10,000 in the aggregate, if necessary to help cover
our costs to comply with the federal securities laws in 2011.
Our
business plan may be unsuccessful.
The
success of our business plan is dependent on our having a valid agreement with
one or more teeth whitening kit manufacturers for the supply of teeth whitening
kits at wholesale prices and our marketing and sale of these teeth whitening
kits. Our ability to develop this market and sell our private label teeth
whitening kits is unproven, and the lack of operating history makes it difficult
to validate our business plan. As a brand based company, marketing and
sales will be driven through the marketing of our private label teeth whitening
kits through infomercials placed on cable television channels as well as
e-marketing through the internet, and at a later stage offering our branded kits
to drug stores, food outlets and supermarkets. In addition, the success of our
business plan is dependent upon the market acceptance of and our intended
competitive pricing for our private label teeth whitening kits. Should the
target market not be as responsive as we anticipate, we will not have in place
alternate services or products that we can offer to ensure our continuation as a
going concern.
Our
business plan may fail because we will be dependent upon third parties for
distribution and fulfillment operations with respect to the private label teeth
whitening kits.
We intend
to outsource our distribution and fulfillment operations and therefore will be
dependent on our distributors to manage inventory, process orders and distribute
our private label teeth whitening kits to our customers in a timely manner. We
have engaged a third party that will provide the distribution and fulfillment
services. If we are unable to maintain the relationship with our distributor, we
may not be able to offer our products at competitive prices, and our sales may
decrease.
5
In
addition, because we will outsource to distributors a number of traditional
retail functions relating to the distribution of our private label products, we
expect to have limited control over how and when orders are fulfilled. Any
inability to offer the products at competitive prices and any failure to deliver
those products to our customers in a timely and accurate manner may damage our
reputation and brand, and could cause us to lose customers.
We
have no operating history and have maintained losses since inception, which we
expect to continue in the future.
We expect
to continue to incur operating losses in future periods. These losses will occur
because we do not yet have any revenues to offset the expenses associated with
the marketing and sale of our private label teeth whitening kits. We cannot
guarantee that we will ever be successful in generating revenues in the future.
We recognize that if we are unable to generate revenues, we will not be able to
earn profits or continue operations.
There is
no history upon which to base any assumption as to the likelihood that we will
prove successful, and we can provide investors with no assurance that we will
generate any operating revenues or ever achieve profitable operations. If
we are unsuccessful in addressing these risks, our business will most likely
fail.
Risks
Relating to Our Business
Our
executive officers and Directors have significant voting power and may take
different actions from actions sought by our other stockholders.
Our
officers and Directors own approximately 63.64% of the outstanding shares of our
common stock.
These
stockholders will be able to exercise significant influence over all matters
requiring stockholder approval. This influence over our affairs might be
adverse to the interest of our other stockholders. In addition, this
concentration of ownership could delay or prevent a change in control and might
have an adverse effect on the market price of our common stock.
Since our officers and Directors may
work or consult for other companies, their other activities could slow down our
operations.
Our
officers and Directors are not required to work exclusively for us and do not
devote all of their time to our operations. Presently, our officers and
Directors allocate only a portion of their time to the operation of our
business. Since our officers and Directors are currently employed full-time
elsewhere, they are each able to commit to us only up to 8-15 hours a week.
Therefore, it is possible that their pursuit of other activities may slow our
operations and reduce our financial results because of the slow-down in
operations.
Our
officers and Directors are located in Israel and our assets may also be held
from time to time outside of the United States.
Since all
of our officers and Directors are located in Israel, any attempt to enforce
liabilities upon such individuals under the U.S. securities and bankruptcy laws
may be difficult.
In
accordance with the Israeli Law on Enforcement of Foreign Judgments, 5718-1958,
and subject to certain time limitations (the application to enforce the judgment
must be made within five years of the date of judgment or such other period as
might be agreed between Israel and the United States), an Israeli court may
declare a foreign civil judgment enforceable if it finds that:
|
•
|
the
judgment was rendered by a court which was, according to the laws of the
State in which the court is located, competent to render the
judgment;
|
|
•
|
the
judgment may no longer be appealed;
|
|
•
|
the
tenor of the judgment is not repugnant to the laws of the State of Israel
or to public policy in Israel; and
|
|
•
|
the
judgment is executory in the State in which it was
given.
|
6
It is
unlikely that an Israeli court would deem the tenor of a judgment of a court of
the United States in relation to federal securities law to be repugnant to the
laws of the State of Israel or to public policy in Israel. However, given
that the decision by Israeli courts to enforce foreign judgments is
discretionary, such a decision cannot be guaranteed.
An
Israeli court will not declare a foreign judgment enforceable if:
|
•
|
the
judgment was obtained by fraud;
|
|
•
|
there
is a finding of lack of due
process;
|
|
•
|
the
judgment is in conflict with another judgment that was given in the same
matter between the same parties and that is still
valid;
|
|
•
|
at
the time the action was instituted in the foreign court, a suit in the
same matter and between the same parties was pending before a court or
tribunal in Israel; or
|
|
•
|
the
judgment was rendered by a court not competent to render it according to
the laws of private international law in Israel. It should be noted
that Israeli courts deem U.S. courts competent to render judgments under
federal securities law according to the laws of private international law
in Israel.
|
Furthermore,
anyone bringing a claim against the Company or its directors in Israel will need
to show that the Israeli court is not a forum non conveniens , i.e.
inappropriate venue to hear such a claim. An Israeli court, in considering
whether it is a forum non
conveniens , will consider which legal forum is most connected to the
dispute, the reasonable expectations of the parties with respect to the place of
jurisdiction of the dispute, and public considerations, such as which forum has
a true interest in dealing with the dispute. If the Israeli court, having
ruled that it is an appropriate forum to hear the claim, decides that U.S. law
has the strongest linkage to the parties and other circumstances of the case, it
will apply U.S. law in adjudicating the claim. In that case, the content of
applicable U.S. law must be proven as a fact, which can be a time-consuming and
costly process.
Our
assets may also be held from time to time outside of the United States.
Currently, the assets of ours that are held outside of the United States are
cash in a bank account in Israel and product samples for testing, for package
design, and for future marketing purposes. We expect such product samples
to continue to be held outside of the United States in the future until they are
used pursuant to our testing, design, and marketing activities. Since our
Directors and executive officers do not reside in the United States, it may be
difficult for courts in the United States to obtain jurisdiction over our
foreign assets or persons, and as a result, it may be difficult or impossible
for you to enforce judgments rendered against us or our Directors or executive
officers in United States courts. Thus, investing in us may pose a greater
risk because should any situation arise in the future in which you would have a
cause of action against these persons or against us, you may face potential
difficulties in bringing lawsuits or, if successful, in collecting judgments
against these persons or against the Company.
Our
officers have no experience in operating a dental care product
business.
Since our
officers and Directors have no experience in operating a dental care product
business or in the marketing of teeth whitening kits, they may make
inexperienced or uninformed decisions regarding the operation of our business or
the marketing of our products, which could harm our business and result in our
having to suspend or cease operations, which could cause investors to lose their
entire investment.
We
may not have effective internal controls.
In
connection with Section 404 of the Sarbanes-Oxley Act of 2002, we need to assess
the adequacy of our internal control, remediate any weaknesses that may be
identified, validate that controls are functioning as documented and implement a
continuous reporting and improvement process for internal controls. We may
discover deficiencies that require us to improve our procedures, processes and
systems in order to ensure that our internal controls are adequate and effective
and that we are in compliance with the requirements of Section 404 of the
Sarbanes-Oxley Act. If the deficiencies are not adequately addressed, or
if we are unable to complete all of our testing and any remediation in time for
compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and
the SEC rules under it, we would be unable to conclude that our internal
controls over financial reporting are designed and operating effectively, which
could adversely affect investor confidence in our internal controls over
financial reporting.
7
Risks
Relating to Our Strategy and Industry
Our
success depends on independent contractors to manufacture and supply us with
teeth whitening kits, and to label, package, and ship these private label
products.
We intend
to purchase teeth whitening kits from third party manufacturers/suppliers and
affix our private label on such kits. We will be relying on independent
contractors for the supply of the teeth whitening kits and for the labeling,
packaging, and shipping of these private label products. We may not be
successful in developing relationships with these independent contractors. In
addition, these third party contractors may not dedicate sufficient resources or
give sufficient priority to satisfying our requirements or needs. There is
no history upon which to base any assumption as to the likelihood that we will
prove successful in selecting qualified third party independent contractors or
in negotiating any agreements with them. If we are unsuccessful in
addressing these risks, our business will most likely fail.
We
do not have commitments from potential suppliers and other independent
contractors.
We may
experience shortages of supplies and inventory because we currently have an
agreement with only one supplier, which supplier will also be providing us
with order fulfillment services. Our success is dependent on our ability
to timely provide our customers with our private label teeth whitening
kits. Although we intend to directly market these products, we will be
dependent on our suppliers and other independent contractors for the manufacture
and supply of the teeth whitening kits and for the labeling, packaging, and
shipment of these private label products. While we have entered into a
contract with one independent contractor for the supply of teeth whitening kits
and the provision of fulfillment services, no assurance can be given that we
will enter into agreements with other suppliers for the supply of teeth
whitening kits at acceptable levels of quality and price, or with other
independent contractors who will provide us with order fulfillment services at
acceptable levels of quality and price. While we anticipate having good
relationships with our potential suppliers and other independent contractors, if
we are unable to secure additional sources of supply or order fulfillment
services from one or more independent contractors on a timely basis and on
acceptable terms, our results of operations could be adversely
affected.
Future
regulation of teeth whitening products could restrict our business, prevent us
from offering the private label products, and/or increase our cost of doing
business.
The U.S.
Food and Drug Administration (“FDA”) currently considers teeth whitening
products to be cosmetic items which do not require FDA approval. However,
the laws, regulations, or rulings that specifically address the sale of teeth
whitening products are subject to change. We are unable to predict the impact,
if any, that future legislation, judicial precedents, or regulations relating to
teeth whitening products may have on our business, financial condition, and
results of operations. The increasing growth of the dental products and services
market heightens the risk that the United States and other governments will seek
to increase the regulation of such market, which could have a material adverse
effect on our business, financial condition, and operating results.
In
November 2009, the American Dental Association (“ADA”) requested that the FDA
enact some form of regulation of teeth whitening products. Based on a resolution
from the ADA’s House of Delegates and after receiving complaints from consumers
and dental professionals, the ADA officially petitioned the FDA to take
action. We expect to rely upon our potential suppliers to meet the various
regulatory and other legal requirements applicable to the products that will be
supplied by them to us. We have inserted a clause in our agreement with
our current supplier to require the supplier to comply with all FDA regulations;
however, we will be relying upon our supplier’s diligence in preparing,
packaging and labeling the kits in order to comply with all U.S. regulatory
laws. In the event of any non-compliance, we may be fined or face exposure
to civil or criminal liability, and we could potentially receive negative
publicity.
International
sales of medical devices are also subject to the regulatory requirements of each
country. In Europe, the regulations of the European Union require that a device
have a CE Mark, a mark that indicates conformance with European Union laws and
regulations before a medical device can be sold in that market. The regulatory
international review process varies from country to country. We will rely upon
our suppliers to comply with the regulatory laws of such countries. Failure to
comply with the laws of each such country could have a material adverse effect
on our operations and, at the very least, could prevent us from continuing to
sell kits in such country.
8
The
reselling of teeth whitening kits is subject to current governmental
regulations.
The
marketing, distribution and sale of the private label teeth whitening kits that
we propose to sell will be subject to the requirements of federal law. While the
Food and Drug Administration (FDA) currently classifies teeth whitening products
as cosmetic products that are not subject to FDA regulations, the products we
plan to sell are subject to the Federal Food, Drug and Cosmetic Act, which
regulates the advertising, record keeping, labeling, handling, storage and sale
of cosmetics. We are not currently required to hold any licenses to conduct our
business as presently operated.
While we
believe we are and will be in substantial compliance with the laws and
regulations which regulate our business, the failure to comply with any of these
laws or regulations, or the imposition of new laws or regulations could
negatively impact our proposed business.
We face intense competition and many
of our competitors have substantially greater resources than we
do.
We will
operate in a highly competitive environment. In addition, the competition
in the market for teeth whitening and cosmetic dental products and services may
intensify. There are numerous well-established companies based in the
United States with longer operating histories, significantly greater resources
and name recognition, and a larger base of distributors and retailers. In
addition, there are smaller entrepreneurial companies who are developing
products and services that will compete with the teeth whitening kits that we
plan to resell under our private label. As a result, these competitors
have greater credibility with our potential customers. They also may be
able to adopt more aggressive pricing policies and devote greater resources to
the development, promotion, and sale of their products. These
competitors may make it difficult for us to market and sell our products and
compete in the teeth whitening market, which could harm our
business.
We depend on market acceptance of the
teeth whitening kits that we plan to resell under our private label. If
these kits do not gain
market acceptance, our ability to compete will be adversely
affected.
Our
success will depend in large part on our ability to successfully market our
private label teeth whitening kits. Although we intend to retain a
packaging consultant and copywriter to assist us in differentiating our products
from those of our competitors on the basis of packaging and our advertising
campaign, the products we plan to resell will be similar in content and effect
to the products of some of our competitors and to the products that our proposed
supplier sells directly and through other distributors. Therefore, no assurances
can be given that we will be able to successfully market our kits or achieve
consumer acceptance. Moreover, failure to successfully commercialize our
private label kits on a timely and cost-effective basis will have a material
adverse effect on our ability to compete in our targeted market. In
addition, medical and dental insurance policies generally do not cover teeth
whitening or other cosmetic dental products and procedures, which may have an
adverse impact upon the market acceptance of our products.
Failure
to meet customers’ expectations or deliver expected performance could result in
losses and negative publicity, which would harm our business.
If the
teeth whitening products which we plan to resell fail to perform in the manner
expected by our customers, then our revenues may be delayed or lost due to
adverse customer reaction. In addition, negative publicity about us and
our private label products could adversely affect our ability to attract or
retain customers. Furthermore, disappointed customers may initiate claims
for damages against us, regardless of our responsibility for their
disappointment.
We
need to retain key personnel to support our services and ongoing
operations.
The
marketing and sale of our private label teeth whitening kits will continue to
place a significant strain on our limited personnel, management, and other
resources. Our future success depends upon the continued services of our
executive officers and the hiring of key employees and contractors who have
critical industry experience and relationships that we rely on to implement our
business plan. The loss of the services of any of our officers or the lack
of availability of other skilled personnel would negatively impact our ability
to market and sell the private label teeth whitening products, which could
adversely affect our financial results and impair our growth.
9
If
we cannot build and maintain strong brand loyalty to our private label products
our business may suffer.
We
believe that the importance of brand recognition will increase as more companies
produce competing teeth whitening products and kits. Development and
awareness of our brand will depend largely on our ability to successfully
advertise and market our private label products. If we are unsuccessful,
our private label may not be able to gain widespread acceptance among
consumers. A failure to develop our private label sufficiently could have
a material adverse effect on our business, results of operations and financial
condition.
We
may be unable to protect our brand name.
Brand
recognition is critical in attracting consumers to our product. We have
researched the availability of the trademark “Havaya” and have not found any
inherent obstacle to registering the trademark with the US patent and trademark
office. Nevertheless, if we are unable to trademark our brand name or to
adequately protect our trade name against infringement or misappropriation, our
competitive position in the teeth whitening market may be undermined, which
could lead to a significant decrease in the volume of private label products
that we resell. Such a result would materially and adversely affect our
results of operations.
We
may incur losses as a result of claims that may be brought against us due to
defective products or as a result of product recalls.
While we
are not aware of any claims having been brought in connection with the teeth
whitening products we plan to resell, we may be liable if the use of the private
label products we resell causes injury, illness, or death. We also may be
required to withdraw or recall some of our private label products if they become
contaminated or are damaged or mislabeled. The most common complaint may
be that the kits do not include adequate amounts of gel to complete the
whitening process. A significant product liability judgment against us or
a widespread product withdrawal or recall could have a material adverse effect
on our business and financial condition.
If
a third party asserts that we infringe upon its proprietary rights, we could be
required to redesign our product, change suppliers, pay significant royalties,
or enter into license agreements.
Although
presently we are not aware of any such claims, a third party may assert that our
private label teeth whitening kit violates its intellectual property rights. As
the number of teeth whitening products in our market increases we believe that
infringement claims will become more common. Any claims against us,
regardless of their merit, could:
•
|
Be
expensive and time-consuming to
defend;
|
•
|
Result
in negative publicity;
|
•
|
Force
us to stop selling our products;
|
•
|
Require
us to engage a new supplier for our teeth whitening
kits;
|
•
|
Divert
management’s attention and our other resources;
and
|
•
|
Require
us to enter into royalty or licensing agreements in order to obtain the
right to sell our products, which right may not be available on terms
acceptable to us, if at all.
|
In
addition, we believe that any successful challenge to our use of a trademark or
domain name could substantially diminish our ability to conduct business in a
particular market or jurisdiction and thus could decrease our revenues and/or
result in losses to our business.
Our lack of business diversification
could result in the loss of your investment if revenues from our primary
products decrease.
Currently,
our business is focused on the marketing and sale of teeth whitening kits that
we will purchase from third party manufacturers. We do not have any other
lines of business or other sources of revenue if we are unable to successfully
implement our business plan. Our lack of business diversification could
cause you to lose all or some of your investment if we are unable to generate
revenues by the sale of teeth whitening kits since we do not have any other
lines of business or alternative revenue sources.
An
unsuccessful material strategic transaction or relationship could result in
operating difficulties and other harmful consequences to our
business.
We expect
to evaluate a wide array of potential strategic transactions and relationships
with third parties. From time to time, we may engage in discussions
regarding potential acquisitions or joint ventures. Any of these transactions
could be material to our financial condition and results of operations, and the
failure of any of these material relationships and transactions may have a
negative financial impact on our business.
10
Risks Relating to Operating in
Israel
We
conduct our operations in Israel and therefore our results may be adversely
affected by political, economic and military instability in Israel.
Our
current operations, potential clients, and our officers and Directors are
located in Israel. Accordingly, political, economic and military conditions in
Israel may directly affect our business. Since the establishment of the State of
Israel in 1948, a number of armed conflicts have taken place between Israel and
its Arab neighbors. Any hostilities involving Israel or the interruption or
curtailment of trade within Israel or between Israel and its trading partners
could adversely affect our operations and could make it more difficult for us to
raise capital.
Since
September 2000, terrorist violence in Israel has increased significantly and
negotiations between Israel and Palestinian representatives have not achieved a
peaceful resolution of the conflict. The establishment in 2006 of a government
in Gaza by representatives of the Hamas militant group has created additional
unrest and uncertainty in the region.
Further,
Israel is currently engaged in an armed conflict with Hamas, which until
Operation Cast Lead in January 2009 had involved thousands of missile strikes
and had disrupted most day-to-day civilian activity in southern
Israel. The missile attacks by Hamas did not target Modiin Illit, the
location of our principal executive offices; however, any armed conflict,
terrorist activity or political instability in the region may negatively affect
business conditions and could significantly harm our results of
operations.
ITEM 2.
|
PROPERTIES
|
Our
Principal Executive Offices
We do not
own any real property. We currently maintain our corporate office at 51 Sheshet
Hayamim St., Kfar Saba, 44269 Israel, which is the residence of one of our
officers. Our principal executive officer provides us with the use of this space
at no cost to the Company. This space is not shared with any other corporations
and the space is not sufficient for any employees. This space will be
sufficient until we commence full operations.
ITEM 3.
|
LEGAL
PROCEEDINGS
|
We know
of no material, active or pending legal proceedings against our Company, nor of
any proceedings that a governmental authority is contemplating against
us.
We know
of no material proceedings to which any of our directors, officers, affiliates,
owner of record or beneficially of more than 5% of our voting securities or
security holder is an adverse party or has a material interest adverse to our
interest.
ITEM 4.
|
(Removed
and Reserved).
|
11
PART
II
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
Market
Information
On
December 20, 2010, our Common Shares began being quoted on the OTCBB under the
symbol “HVAY.OB”. Prior to that date, there was no established trading market
for our Common Shares. There has been no active trading in
our securities and there have been no high or low bid prices
quoted.
Holders
of our Common Shares
As of
January 30, 2011, there were 45 registered stockholders holding 6,500,000 Common
Shares issued and outstanding.
Dividends
Since our
inception, we have not declared nor paid any cash dividends on our capital stock
and we do not anticipate paying any cash dividends in the foreseeable future.
Our current policy is to retain any earnings in order to finance our operations.
Our Board of Directors will determine future declarations and payments of
dividends, if any, in light of the then-current conditions it deems relevant and
in accordance with applicable corporate law.
There are
no restrictions in our Articles of Incorporation or Bylaws that prevent us from
declaring dividends. The Nevada Revised Statutes, however, do prohibit us from
declaring dividends where, after giving effect to the distribution of the
dividend:
|
·
|
we
would not be able to pay our debts as they become due in the usual course
of business; or
|
|
·
|
our
total assets would be less than the sum of our total liabilities plus the
amount that would be needed to satisfy the rights of stockholders who have
preferential rights superior to those receiving the
distribution.
|
Securities
Authorized for Issuance Under Equity Compensation Plans
As of the
date hereof, we have not adopted an equity compensation plan and have not
granted any stock options.
Recent
Sales of Unregistered Securities
During
the fiscal year ended December 31, 2010, except as included in our Quarterly
Reports on Form 10-Q or in our Current Reports on Form 8-K, we have
not sold any equity securities not registered under the Securities
Act.
Purchases
of Equity Securities by the Issuer and Affiliated Purchases
During
each month within the fourth quarter of the fiscal year ended December 31, 2010,
neither we nor any “affiliated purchaser”, as that term is defined in Rule
10b-18(a)(3) under the Exchange Act, repurchased any of our Common Shares or
other securities.
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
Not
applicable.
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
12
The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations (“MD&A”) is intended to help you understand our
historical results of operations during the periods presented and our financial
condition. This MD&A should be read in conjunction with our financial
statements and the accompanying notes, and contains forward-looking statements
that involve risks and uncertainties. See section entitled “Forward Looking
Statements” above.
EXECUTIVE
OVERVIEW
We are a
development stage company with limited operations and no revenues from our
business operations. Our auditors have issued a going concern opinion. This
means that our auditors believe there is substantial doubt that we can continue
as an on-going business for the next twelve months. We do not anticipate that we
will generate significant revenues until we are able to market the private label
teeth whitening kits and generate customers. Accordingly, we must raise cash
from sources other than our operations in order to implement our marketing
plan.
In our
management’s opinion, there is a market for reasonably priced teeth whitening
kits intended for application at home.
We
believe that we will need to raise additional funds in order to allow us to
begin our market development and to remain in business for twelve months. We
expect to begin to generate revenues during the third quarter of 2011. If we
raise the necessary funds, but are unable to generate revenues within the next
twelve months for any reason, or if we are unable to make a reasonable profit
within the next twelve months, we may have to suspend or cease operations. At
the present time, we have not made any arrangements to raise additional cash to
finance our operations. We may seek to obtain additional funds through a second
public offering, a private placement of securities, or loans. Other than as
described in this paragraph and in our Registration Statement on Form S-1 that
went effective on November 12, 2010, we have no financing plans at this time,
except for a commitment by our directors to loan us up to $10,000 in the
aggregate, if necessary to help cover our costs to comply with the federal
securities laws in 2011.
Plan
of Operation
Our
specific goal is to become a leading seller of teeth whitening kits for the home
market. Assuming we raise the additional funds necessary for us to operate our
business, our plan of operation is as follows:
In May
2010, we entered into a supply agreement with Pacific Naturals, a
California-based company, which distributes teeth whitening kits manufactured by
Brite Impressions Teeth Whitening Company and which provides order fulfillment
services. We intend to work with one or more suppliers based in the United
States to achieve competitive terms for the supply of our branded teeth
whitening kits. We then intend to resell the kits by marketing them to customers
through paid infomercials on cable television as well as on the
internet.
In May
2010, Pacific Naturals, our supplier, agreed to also act as our fulfillment
center. The order fulfillment services provider will handle all incoming calls
from customers, and will handle the entire sales process, including billing and
shipping.
Purchasing
Strategy
We intend
to purchase privately labeled teeth whitening kits from one or more suppliers in
the United States. We have entered into a supply agreement with Pacific
Naturals, a distributor of such kits.
We
believe that 100 teeth whitening kits will be sufficient for sampling, testing,
and design purposes, and therefore we issued an initial purchase order for 100
kits. We directed that ten units be delivered to our offices in Israel for
product testing and design purposes. Ten units have been delivered to our
offices in Israel, and we are testing them. We have recently completed the
package design process.
In the
second quarter of 2011, we expect to order a quantity of approximately 5,000
kits, which we expect will cover a six-month production and sales period. We
based this projection on the assumption that we will be able to sell 300 kits
per month from the time we commence our advertising blitz, which we plan to
launch in the third quarter of 2011. A first commercial order of
5,000 kits will allow us to maintain inventory at our fulfillment center
warehouse, which will protect us from unanticipated delays in production, in the
event sales are better than expected. Furthermore, we will save on printing
costs with an order of 5,000 kits since the cost per kit would be higher for a
smaller first commercial order. However, the quantity of our estimated first
commercial order may change depending on the level of historical and future
forecasted demand.
13
Each
teeth whitening kit will contain twenty applications of the teeth whitening
system.
Sales
Strategy
We intend
to commence the marketing of our teeth whitening kits with a high visibility
launch campaign which will entail advertising on cable TV and through internet
marketing. Fulfillment of sales will be carried out through a 24/7 telephone
contact/order fulfillment center that will provide order processing, electronic
commerce, electronic payment facilities, shipping, logistics, warehousing and
inventory control.
Subject
to raising additional funds, we anticipate commencing our marketing campaign on
cable television by the third quarter of 2011 and hence believe that the Company
will commence sales during the third quarter of 2011. After the
initial advertising campaign over a three week period we envision that we will
have more experience and more knowledge in order to target our potential
customers more precisely.
Once
sales of 1,000 units per month have been achieved, we will explore expanding our
market reach into the over-the-counter market by supplying teeth whitening kits
through distributors to food outlets, retail and drug stores, etc. This strategy
will be executed selectively to regions that have shown historical high growth
of sales during the earlier sales campaigns.
Fulfillment Strategy
We intend
to retain an order fulfillment services company to:
|
·
|
Receive
orders electronically and by
telephone;
|
|
·
|
Provide
central warehousing facilities;
|
|
·
|
Handle
payment and transaction processes;
|
|
·
|
Pick,
pack and ship products according to order
specifications;
|
|
·
|
Handle
delivery of products to final destinations;
and
|
|
·
|
Handle
returns.
|
Marketing/Advertising
Strategy
To
penetrate the market and achieve product exposure, we plan to launch our product
regionally in several states with a three week “blitz” advertising campaign
using cable TV, broadcast TV and internet advertising. The cost of the TV
advertising campaign will be approximately $9,605, broken down as follows:
$3,330 on Lifetime Cable, $2,775 on Discovery Health, and $3,500 on the CW
Network (formerly UPN). Based on our budget, during our three week “blitz”
advertising campaign, we anticipate purchasing between 55-133 commercials on
Lifetime Cable at a cost of between $25-$50 per airing, 55-138 commercials on
Discovery Health at a running cost of $20-$50 per airing, and 8-17 commercials
on CW Network at a running cost of $200-$400 per airing (not including prime
time Monday – Friday or Sunday). Our cost assumptions for our advertising budget
for CW Network are based on the rate card which we received from them. As to the
other cable stations, we based our cost assumptions on a quotation that we
received from National TV Spots, a national advertising agency.
Our first
campaign will be considered a test campaign. We will study the results of this
campaign in order to better target potential customers. We will be looking at
the number of orders that are received from different advertising slots. We
thereby hope to ascertain the best time to advertise on cable TV, and the best
channels, the best demographics, and the best cities to target. In this way, we
will put our limited resources to work on purchasing new advertising time to
best effect.
14
The next
sales phase will be a selective long term advertising campaign on the same media
channels to continue building on the Havaya brand recognition and to maintain
sales growth. We intend to budget up to $5,500 per month for additional cable TV
advertising.
We intend
to concentrate on marketing and advertising our product in the following three
ways:
|
1.
|
Via
direct response TV commercials on three major networks including UPN,
Lifetime Cable, and Discovery Health Cable. Commercials of 15 and 30
seconds will be screened for three weeks at strategic times, Wednesday
through to Friday, to focus on our target audience. The advertisements
will run at a minimum of one per hour. Incoming call results will be
studied and analyzed for fine tuning of the advertising
campaign.
|
|
2.
|
We
will launch a website with direct on-line sales and promotions. We intend
to market our website on social media channels with banner advertisements
enticing potential customers with promotional
offers.
|
|
3.
|
Advertising
will initially be regional and thereafter be national, using an
advertising and marketing company which will devise, design and book
media. This organization will also strategize the most advantageous use of
direct on-line advertising with the concomitant telephone 1-800 number for
direct purchasing and payment method. An English language website will be
constructed to offer information and visuals plus on-line purchasing
(e-commerce). We have not yet selected an advertising company to perform
the services we require.
|
We have
established a 1-800 number and when required we will re-route this number to
Pacific Naturals or any other subcontractor that will become our fulfillment
services provider.
In
December 2009 we entered into preliminary discussions with a production company
regarding producing an infomercial, as well as with a graphic design company to
produce labels and packaging for our teeth whitening kits. We have not executed
an agreement with the production company due to our current need to conserve
funds until we raise additional cash
Activities
to Date
We were
incorporated under the laws of the State of Delaware on November 21, 2007. We
are a development stage company. We currently have no employees. From our
inception to date, we have not generated any revenues, and our operations have
been limited to organizational and start-up activities.
We have
conducted market research into the teeth whitening market in the United States.
Our research covered:
|
·
|
different
types of teeth whitening products currently available, including both
professional systems and home use
systems;
|
|
·
|
the
benefit of using carbamide peroxide versus hydrogen
peroxide;
|
|
·
|
the
usage patterns for users of teeth whitening
products;
|
|
·
|
the
target customers for teeth whitening products;
and
|
|
·
|
types
of teeth whitening kits.
|
We have
sourced supply of the teeth whitening kits, and have entered into a supply and
fulfillment agreement with Pacific Naturals. The supply and fulfillment
agreement is for an initial term of three years and will automatically renew for
additional one-year terms unless one party provides the other with a termination
notice. Either party may terminate the agreement for convenience upon ninety
days prior written notice; provided, however, that as long as we purchase twenty
thousand (20,000) private label products in the first year, Pacific Naturals may
not terminate the Agreement for convenience. Pacific Naturals has agreed to
label and package our private label products pursuant to our instructions.
Pacific Naturals has agreed to ensure that all products sold to us shall be
manufactured, labeled, packaged, and shipped in conformity with all applicable
governmental laws and regulations, and Pacific Naturals shall obtain and
maintain throughout the term of the agreement all necessary regulatory and
compliance certifications and approvals. Pacific Naturals has also agreed to
provide us with the following order fulfillment services: receive orders
electronically and by telephone; provide central warehousing facilities; handle
payment and transaction processes; pick, pack and ship products according to
order specifications; handle delivery of products to final destinations; and
handle returns.
15
Results
of Operations
During
the period from November 21, 2007 (date of inception) through December 31, 2010,
we incurred a net loss of $42,269. This loss consisted primarily of general and
administrative expenses, comprising professional fees paid for legal and
accounting services provided to us, travel expenses related to two business
trips to the Far East by a consultant to evaluate potential suppliers of teeth
whitening systems, and consulting fees for assistance with the writing of our
business plan. Since inception, we have sold 4,500,000 shares of common stock to
our Directors.
Purchase
or Sale of Equipment
We do not
expect to purchase or sell any plant or significant equipment.
Revenues
We had no
revenues for the period from November 21, 2007 (date of inception) through
December 31, 2010.
Liquidity
and Capital Resources
Our
balance sheet as of December 31, 2010, reflects assets of $10,359. Cash and cash
equivalents from inception to date have been insufficient to provide the working
capital necessary to operate to date.
We
anticipate generating losses and, therefore, may be unable to continue
operations in the future. Except for private placement financing in 2009 and an
investment by both of our Directors in April 2010, we have not attempted to
raise any additional capital. To date, we have not attempted to raise additional
capital from any third party sources. In an effort to limit the dilution of our
shareholders, we have decided first to attempt to increase the value of our
company before raising additional capital from third parties. Since we require
additional capital, we may have to issue debt or equity or enter into a
strategic arrangement with a third party. We may also request that our current
Directors provide us with such interim financing. There can be no assurance that
additional capital will be available to us. We currently have no agreements,
arrangements or understandings with any person to obtain funds through bank
loans, lines of credit, or any other sources, except for a commitment by our
Directors to loan us up to $10,000 in the aggregate, if necessary to help cover
our costs to comply with the federal securities laws in 2011.
We
currently do not have sufficient funds to effectuate our short term business
operations for the next twelve months. Hence we are currently in the process of
looking for additional equity or debt investors. Our long term
liquidity also falls under lack of funding and hence we are looking to raise
additional funds from our shareholders or other sources.
Going
Concern Consideration
Our
independent auditors included an explanatory paragraph in their report on the
accompanying financial statements regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that lead to this disclosure by our
independent auditors.
Seasonality
We do not
expect our sales to be impacted by seasonal demands for our products and
services.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements.
CRITICAL
ACCOUNTING POLICIES
We do not
expect the adoption of any recently issued accounting pronouncements to have a
significant impact on our net results of operations, financial position, or cash
flows.
16
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Not
applicable.
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The
financial statements required by this item are included in this report in Part
IV, Item 15, and beginning on page F-1.
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
Not
applicable.
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
(a)
Disclosure Controls and Procedures
Disclosure
controls and procedures are the controls and other procedures that are designed
to provide reasonable assurance that information required to be disclosed by the
issuer in the reports that it files or submits under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the issuer’s
management, including the principal executive and principal financial officer,
or persons performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure. Any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives.
We have
carried out an evaluation, under the supervision and with the participation of
our Chief Executive Officer and Principal Financial and Accounting Officer, of
the effectiveness of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the fiscal year
covered by this Annual Report.
Based on
that evaluation, our Chief Executive Officer and our Principal Financial and
Accounting Officer have concluded that the Company’s disclosure controls and
procedures were effective as of the end of the fiscal year covered by this
Annual Report on Form 10-K.
(b)
Management’s Annual Report on Internal Control over Financial
Reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Securities Exchange Act Rule 13a-15(f).
Internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and preparation of
financial statements for external purposes in accordance with U.S.
GAAP.
Under the
supervision and with the participation of our Chief Executive Officer and our
Principal Financial and Accounting Officer, we conducted an assessment of the
design and effectiveness of our internal control over financial reporting as of
the fiscal year covered by this report. Based on this assessment, management
concluded that, as of December 31, 2010, the Company’s internal control over
financial reporting was effective.
Based on
this assessment, management concluded that, as of December 31, 2010, the
Company’s internal control over financial reporting was effective.
17
(c)
Change in Internal Control over Financial Reporting
There
were no significant changes to our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our
fourth fiscal quarter, that could materially affect, or are reasonably likely to
materially affect, our internal control over financial reporting.
ITEM 9B.
|
OTHER
INFORMATION
|
None.
18
PART
III
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
Our
Directors hold office until the next annual general meeting of the stockholders
or until their successors are elected and qualified. Our officers are appointed
by our Board of Directors and hold office until the earlier of their death,
retirement, resignation, or removal.
Our
officers and Directors and their ages and positions are as follows:
Name
|
Age
|
Position
|
||
Avraham
Grundman
|
28
|
President,
Treasurer and Director
|
||
Benny
Adler
|
28
|
Secretary
and
Director
|
Business
Experience
The
following is a brief summary of the education and business experience during at
least the past five years of each Director, executive officer and key employee
of our Company, indicating the person's principal occupation during that period,
and the name and principal business of the organization in which such occupation
and employment were carried out.
Mr.
Avraham Grundman
Mr.
Grundman has been our President, Treasurer and a Director since July 15,
2008.
Since
early 2008, Mr. Grundman has been a sales manager at the Kenion Rephaeli
Electronic Store in Jerusalem, Israel. Between the years 2006 and 2008 Mr.
Grundman was employed as a sales manager at Kensun, an online wholesaler of
Xenon lighting for car headlights. Mr. Grundman was responsible for
sales to international clients. From 2003 until 2006, Mr. Grundman was a sales
manager at IDT’s Jerusalem branch.
Mr.
Grundman is not an officer or Director of any other reporting
company. Mr. Grundman intends to devote approximately 8-15 hours of
his weekly business hours to our affairs.
The Board
has concluded that Mr. Grundman should serve as Director of the Company because
of his experience as a sale manager and his ability to oversee the sales
process.
Mr.
Benny Adler
Mr. Adler
has been our Secretary and a Director since November 24, 2008.
Since
2009, Mr. Adler has been working towards a Bachelors of Arts degree in
Management and Communications at the Open University of Raanana,
Israel.
Since
2009, Mr. Adler has been working at the Open University, marketing courses
offered at the Open University to potential students.
From 2003
until his employment at the Open University in 2009, Mr. Adler was employed at
Life Computers Ltd., one of Israel’s leading importers and distributors of
computer hardware. Mr. Adler had several positions at Life Computers
Ltd., including supervising inventory at its warehouse where several million
dollars worth of computer components were held and distributed. Mr. Adler final
position at Life Computer Ltd. was as a business-to-business sales
executive.
Mr. Adler
is not an officer or Director of any other reporting company. Mr.
Adler intends to devote approximately 8-15 hours of his weekly business hours to
our affairs.
19
The Board
has concluded that Mr. Adler should serve as director of the Company because of
his experience with inventory management and his sales experience.
Committees
of the Board of Directors
We do not
presently have a separately constituted audit committee, compensation committee,
nominating committee, executive committee or any other committee of our Board of
Directors. As such, our entire Board of Directors acts as our audit
committee.
Audit
Committee Financial Expert
Our Board
of Directors does not currently have any member who qualifies as an audit
committee financial expert. We believe that the cost of retaining such a
financial expert at this time is prohibitive. Further, because we are in the
start-up stage of our business operations, we believe the services of an audit
committee financial expert are not necessary at this time.
Involvement
in Legal Proceedings
None of
our Directors, nominee for Directors or officers has appeared as a party during
the past ten years in any legal proceedings that may bear on his ability or
integrity to serve as a Director or officer of the Company.
Board
Leadership Structure
The
Company has chosen to combine the principal executive officer and Board chairman
positions. The Company believes that this Board leadership structure
is the most appropriate for the Company for several reasons. First,
the Company is a development stage company and at this early stage it is more
efficient to have the leadership of the Board in the same hands as the principal
executive officer of the Company. The challenges faced by the Company
at this stage – obtaining financing and implementing a marketing and sales plan
– are most efficiently dealt with by having one person intimately familiar with
both the operational aspects as well as the strategic aspects of the Company’s
business. Second, Mr. Grundman is uniquely suited to fulfill both
positions of responsibility because he possesses sales and management
experience.
Code
of Ethics
We do not
currently have a Code of Ethics applicable to our principal executive, financial
and accounting officers; however, we are considering whether to implement such a
code in 2011.
Potential
Conflict of Interest
Since we
do not have an audit or compensation committee comprised of independent
Directors, the functions that would have been performed by such committees are
performed by our Board of Directors. Thus, there is a potential conflict of
interest in that our Directors have the authority to determine issues concerning
management compensation, in essence their own, and audit issues that may affect
management decisions. We are not aware of any other conflicts of interest with
any of our executives or Directors.
Board’s
Role in Risk Oversight
The Board
assesses on an ongoing basis the risks faced by the Company. These
risks include financial, technological, competitive, and operational
risks. The Board dedicates time at each of its meetings to review and
consider the relevant risks faced by the Company at that time. In
addition, since the Company does not have an Audit Committee, the Board is also
responsible for the assessment and oversight of the Company’s financial risk
exposures.
20
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
We have
not paid, nor do we owe, any compensation to our executive officers. We have not
paid any compensation to our officers since inception.
We have
no employment agreements with any of our executive officers or
employees.
Outstanding
Equity Awards
Our
Directors and officers do not have unexercised options, stock that has not
vested, or equity incentive plan awards.
Compensation
of Directors
Our
Directors do not receive compensation for their services as
Directors.
Employment
Contracts, Termination of Employment, Change-in-Control
Arrangements
There are
no employment or other contracts or arrangements with officers or Directors.
There are no compensation plans or arrangements, including payments to be made
by us, with respect to our officers, Directors or consultants that would result
from the resignation, retirement or any other termination of such Directors,
officers or consultants from us. There are no arrangements for Directors,
officers, employees or consultants that would result from a
change-in-control.
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
Beneficial
Ownership of Holdings.
The
following table sets forth, as of December 31, 2010, certain information with
respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock, as
well as by each of our current directors and executive officers as a group. Each
person has sole voting and investment power with respect to the shares of common
stock, except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise
indicated.
Name
and Address
of
Beneficial Owner
|
Title of Class
|
Amount and Nature of
Beneficial Ownership(1)
|
Percentage of Class(2)
|
|||||||
Avraham
Grundman
|
Common
|
3,750,000 | 54.55 | % | ||||||
Benny
Adler
|
Common
|
750,000 | 9.09 | % | ||||||
Total
|
Common
|
4,500,000 | 63.64 | % |
Notes:
|
(1)
|
Except
as otherwise indicated, we believe that the beneficial owners of the
common stock listed above, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject
to community property laws where applicable. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options or warrants
currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage ownership of the
person holding such option or warrants, but are not deemed outstanding for
purposes of computing the percentage ownership of any other
person.
|
|
(2)
|
Based
on 6,500,000 shares of common stock issued and outstanding as of December
31, 2010.
|
Changes
in Control
We are
unaware of any contract or other arrangement the operation of which may at a
subsequent date result in a change of control of our Company.
21
Equity
Compensation Plan Information
Plan
category
|
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights
(a)
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities reflected
in column (a))
(c)
|
|||||||||
Equity
compensation plans approved by security holders
|
0 | 0 | 0 | |||||||||
Equity
compensation plans not approved by security holders
|
0 | 0 | 0 | |||||||||
Total
|
0 | 0 | 0 |
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
|
Since the
beginning of the fiscal year preceding the last fiscal year and except as
disclosed below, none of the following persons has had any direct or indirect
material interest in any transaction to which our Company was or is a party, or
in any proposed transaction to which our Company proposes to be a
party:
|
·
|
any
director or officer of our Company;
|
|
·
|
any
proposed director of officer of our
Company;
|
|
·
|
any
person who beneficially owns, directly or indirectly, shares carrying more
than 5% of the voting rights attached to our common stock;
or
|
|
·
|
any
member of the immediate family of any of the foregoing persons (including
a spouse, parents, children, siblings, and
in-laws).
|
As of
December 31, 2010, our President, Mr. Avraham Grundman, has provided us with a
loan of $5,754. The loan is unsecured, non-interest bearing, and due on
demand.
On April
22, 2010, the Company issued 750,000 shares of common stock to our President,
Mr. Avraham Grundman, for cash payment of $15,000 which was received by the
Company in two installments on April 21 and April 22, 2010. We
believe this issuance was deemed to be exempt under Section 4(2) of the
Securities Act. No advertising or general solicitation was employed
in offering the securities. The offering and sale was made only to
Mr. Avraham Grundman and transfer was restricted by us in accordance with the
requirements of the Securities Act of 1933.
On April
22, 2010, the Company issued 250,000 shares of common stock to Mr. Benny Adler,
our Secretary and Director, for cash payment of $5,000 which was received by the
Company on April 22, 2010. We believe this issuance was deemed to be
exempt under Regulation S of the Securities Act. No advertising or
general solicitation was employed in offering the securities. The
offering and sale was made only to Mr. Benny Adler, who is a non-U.S. citizen,
and transfer was restricted by us in accordance with the requirements of the
Securities Act of 1933
Avraham
Grundman and Benny Adler are not Independent Directors of the Company as they
are executive officers of the Company. The determination of independence of
Directors has been made using the definition of "Independent Director" contained
under Nasdaq Marketplace Rule 4200(a)(15).
22
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
Audit
Fees
The
aggregate fees billed for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of our financial
statements and review of financial statements included in our quarterly Reports
on Form 10-Q and services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for these fiscal
periods were as follows:
December 31, 2010
|
December 31, 2009
|
|||||||
Audit
Fees
|
11,000 | 0 | ||||||
Audit
Related Fees
|
0 | 0 | ||||||
Tax
Fees
|
500 | 0 | ||||||
All
Other Fees
|
0 | 0 |
In each
of the last two fiscal years ended December 31, 2010 and 2009, there were no
fees billed for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit or review of our
financial statements and are not reported under Item 9(e)(1) of Schedule 14A,
for professional services rendered by the principal account for tax compliance,
tax advice, and tax planning, for products and services provided by the
principal accountant, other than the services reported in Item 9(e)(1) through
9(d)(3) of Schedule 14A.
Audit
Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
Given the
small size of our Board of Directors as well as the limited activities of our
Company, our Board of Directors acts as our Audit Committee. Our Board of
Directors pre-approves all audit and permissible non-audit services. These
services may include audit services, audit-related services, tax services and
other services. Our Board of Directors approves these services on a case-by-case
basis.
23
PART
IV
ITEM 15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
(a)
|
Financial
Statements and financial statement
schedules
|
(1) and
(2) The financial statements and financial statement schedules required to be
filed as part of this report are set forth in Item 8 of Part II of this
report.
(3)
Exhibits. See Item 15(b) below.
(b)
|
Exhibits
required by Item 601 of Regulation
S-K
|
Exhibit
No.
|
Description
|
|
3.1
|
Articles
of Incorporation (incorporated by reference from our Registration
Statement on Form S-1 filed on February 26, 2010).
|
|
3.2
|
Bylaws
(incorporated by reference from our Registration Statement on Form S-1
filed on February 26, 2010).
|
|
10.1
|
Supply
Agreement with Pacific Naturals (incorporated by
reference from our Registration Statement on Form S-1 filed on October 12,
2010).
|
|
10.2
|
Directors’
Undertaking to loan the Company up to $10,000 in the aggregate, if
necessary to help cover costs to comply with the federal securities laws
(incorporated by reference from our Registration Statement on Form S-1
filed on October 12, 2010).
|
|
31.1*
|
Section
302 Certification of the Sarbanes-Oxley Act of 2002 of Avraham
Grundman
|
|
32.1*
|
Section
906 Certification of the Sarbanes-Oxley Act of 2002 of Avraham
Grundman
|
|
*Filed
herewith
24
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
HAVAYA
CORP.
(Registrant)
|
|
By:
|
/s/ Avraham Grundman
|
Name:
Avraham Grundman
|
|
Title:
President, Treasurer (Principal
Executive
Officer and Principal Financial
and
Accounting Officer) and
Director
|
Dated:
February 1, 2011
Pursuant
to the requirements of the Securities Exchange Act of 1934, 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/ Avraham Grundman
|
Name:
Avraham Grundman
|
|
Title:
President, Treasurer (Principal
Executive
Officer and Principal Financial
and
Accounting Officer) and
Director
|
Dated:
February 1, 2011
By:
|
/s/ Benny Adler
|
Name:
Benny Adler
|
|
Title:
Secretary and Director
|
Dated:
February 1, 2011
25
HAVAYA
CORP.
(A
DEVELOPMENT STAGE COMPANY)
INDEX
TO FINANCIAL STATEMENTS
DECEMBER
31, 2010 AND 2009
Report
of Registered Independent Auditors
|
F-2
|
|
Financial
Statements-
|
||
Balance
Sheets as of December 31, 2010 and 2009
|
F-3
|
|
Statements of Operations for the
Periods Ended December 31, 2010 and 2009, and
Cumulative from Inception
|
F-4
|
|
Statement of Stockholders’ Equity
for the Period from Inception Through December 31,
2010
|
F-5
|
|
Statements of Cash Flows for the
Periods Ended December 31, 2010 and 2009, and Cumulative from
Inception
|
F-6
|
|
Notes
to Financial Statements
|
F-7
|
F-1
REPORT
OF REGISTERED INDEPENDENT AUDITORS
To the
Board of Directors and Stockholders
of Havaya
Corp.:
We have
audited the accompanying balance sheets of Havaya Corp. (a Delaware corporation
in the development stage) as of December 31, 2010 and 2009, and the related
statements of operations, stockholders’ equity, and cash flows for years ended
December 31, 2010 and 2009, and from inception (November 21, 2007) through
December 31, 2010. 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 standards of the Public Company
Accounting Oversight Board (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. 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 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 Havaya Corp. as of December 31,
2010 and 2009, and the results of its operations and its cash flows for the
years ended December 31, 2010 and 2009, and from inception (November 21, 2007)
through December 31, 2010, in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company is in the development stage, and has not established any
source of revenue to cover its operating costs. As such, it has incurred an
operating loss since inception. Further, as of December 31, 2010, the cash
resources of the Company were insufficient to meet its planned business
objectives. These and other factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plan regarding these
matters is also described in Note 2 to the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Respectfully
submitted,
Weinberg
& Baer LLC
Baltimore,
Maryland
January
26, 2011
F-2
HAVAYA
CORP.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
AS
OF DECEMBER 31, 2010 AND 2009
2010
|
2009
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 10,297 | $ | 18,543 | ||||
Prepaid
expenses
|
62 | - | ||||||
Total
current assets
|
10,359 | 18,543 | ||||||
Total
Assets
|
$ | 10,359 | $ | 18,543 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 16,036 | $ | 7,271 | ||||
Due
to shareholders
|
5,724 | 754 | ||||||
Total
current liabilities
|
21,760 | 8,025 | ||||||
Total
liabilities
|
21,760 | 8,025 | ||||||
Commitments
and Contingencies
|
- | - | ||||||
Stockholders'
Equity (Deficit):
|
||||||||
Common
stock, par value $0.0001 per share, 200,000,000 shares authorized;
6,500,000 and 5,500,000 shares issued and outstanding,
respectively
|
650 | 550 | ||||||
Stock
subscriptions receivable
|
- | (350 | ) | |||||
Additional
paid-in capital
|
59,700 | 39,800 | ||||||
(Deficit)
accumulated during development stage
|
(71,751 | ) | (29,482 | ) | ||||
Total
stockholders' equity (deficit)
|
(11,401 | ) | 10,518 | |||||
Total Liabilities and
Stockholders' Equity
|
$ | 10,359 | $ | 18,543 |
The
accompanying notes to financial statements are
an
integral part of these statements.
F-3
HAVAYA
CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009, AND
CUMULATIVE
FROM INCEPTION (NOVEMBER 21, 2007)
THROUGH
DECEMBER 31, 2010
Year Ended
|
Year Ended
|
Cumulative
|
||||||||||
December 31,
|
December 31,
|
From
|
||||||||||
2010
|
2009
|
Inception
|
||||||||||
Revenues
|
$ | - | $ | - | $ | - | ||||||
Expenses:
|
||||||||||||
General
and administrative-
|
||||||||||||
Marketing
expenses
|
1,152 | - | 1,152 | |||||||||
Professional
fees
|
31,296 | 5,500 | 37,821 | |||||||||
Consulting
fees
|
- | 5,000 | 5,000 | |||||||||
Travel
expenses
|
- | 16,705 | 16,705 | |||||||||
Organization
costs
|
- | - | 1,500 | |||||||||
Filing
fees
|
9,704 | - | 9,704 | |||||||||
Franchise
tax expense
|
286 | 286 | ||||||||||
Other
|
417 | 792 | 1,325 | |||||||||
Total
general and administrative expenses
|
42,855 | 27,997 | 73,493 | |||||||||
- | ||||||||||||
(Loss)
from Operations
|
(42,855 | ) | (27,997 | ) | (73,493 | ) | ||||||
Other
Income (Expense)
|
586 | 1,155 | 1,742 | |||||||||
Provision
for income taxes
|
- | - | - | |||||||||
Net
(Loss)
|
$ | (42,269 | ) | $ | (26,842 | ) | $ | (71,751 | ) | |||
(Loss)
Per Common Share:
|
||||||||||||
(Loss)
per common share - Basic and Diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | ||||||
Weighted
Average Number of Common Shares Outstanding - Basic and
Diluted
|
6,195,890 | 4,563,014 |
The
accompanying notes to financial statements are
an
integral part of these statements.
F-4
HAVAYA
CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF STOCKHOLDERS' EQUITY
FOR
THE PERIOD FROM INCEPTION (NOVEMBER 21, 2007)
THROUGH
DECEMBER 31, 2010
(Deficit)
|
||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||
Stock
|
Additional
|
During the
|
||||||||||||||||||||||
Common
stock
|
Subscriptions
|
Paid-in
|
Development
|
|||||||||||||||||||||
Description
|
Shares
|
Amount
|
Receivable
|
Capital
|
Stage
|
Totals
|
||||||||||||||||||
Balance
- at inception
|
- | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Common
stock issued for cash
|
3,000,000 | 300 | - | - | - | 300 | ||||||||||||||||||
Common
stock issued for cash
|
500,000 | 50 | - | - | - | 50 | ||||||||||||||||||
Stock
Subscriptions Receivable
|
- | - | (350 | ) | - | - | (350 | ) | ||||||||||||||||
Net
(loss) for the period
|
- | - | - | - | (2,640 | ) | (2,640 | ) | ||||||||||||||||
Balance
- December 31, 2008
|
3,500,000 | 350 | (350 | ) | - | (2,640 | ) | (2,640 | ) | |||||||||||||||
Common
stock issued for cash
|
2,000,000 | 200 | - | 39,800 | - | 40,000 | ||||||||||||||||||
Net
(loss) for the period
|
- | - | - | - | (26,842 | ) | (26,842 | ) | ||||||||||||||||
Balance
-December 31, 2009
|
5,500,000 | $ | 550 | $ | (350 | ) | $ | 39,800 | $ | (29,482 | ) | $ | 10,518 | |||||||||||
Stock
Subscriptions received
|
- | 350 | - | - | 350 | |||||||||||||||||||
Common
stock issued for cash
|
1,000,000 | 100 | - | 19,900 | - | 20,000 | ||||||||||||||||||
Net
(loss) for the period
|
- | - | - | - | (42,269 | ) | (42,269 | ) | ||||||||||||||||
Balance
-December 31, 2010
|
6,500,000 | $ | 650 | $ | - | $ | 59,700 | $ | (71,751 | ) | $ | (11,401 | ) |
The
accompanying notes to financial statements are
an
integral part of these statements.
F-5
HAVAYA
CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
FOR
THE PERIODS ENDED DECEMBER 31, 2010 AND 2009, AND
CUMULATIVE
FROM INCEPTION (NOVEMBER 21, 2007)
THROUGH
DECEMBER 31, 2010
Year Ended
|
Year Ended
|
Cumulative
|
||||||||||
December 31,
|
December 31,
|
From
|
||||||||||
2010
|
2009
|
Inception
|
||||||||||
Operating
Activities:
|
||||||||||||
Net
(loss)
|
$ | (42,269 | ) | $ | (26,842 | ) | $ | (71,751 | ) | |||
Adjustments
to reconcile net (loss) to net cash provided by operating
activities:
|
||||||||||||
Changes
in net assets and liabilities-
|
||||||||||||
Prepaid
expenses
|
(62 | ) | - | (62 | ) | |||||||
Accounts
payable and accrued liabilities
|
8,765 | 5,500 | 16,036 | |||||||||
Net
Cash Used in Operating Activities
|
(33,566 | ) | (21,342 | ) | (55,777 | ) | ||||||
Investing
Activities:
|
||||||||||||
Cash
provided by investing activities
|
- | - | - | |||||||||
Net
Cash Provided by Investing Activities
|
- | - | - | |||||||||
Financing
Activities:
|
||||||||||||
Proceeds
from shareholder loans
|
4,970 | - | 5,724 | |||||||||
Proceeds
from common stock
|
20,350 | 40,000 | 60,350 | |||||||||
Net
Cash Provided by Financing Activities
|
25,320 | 40,000 | 66,074 | |||||||||
Net
(Decrease) Increase in Cash
|
(8,246 | ) | 18,658 | 10,297 | ||||||||
Cash
- Beginning of Period
|
18,543 | (115 | ) | - | ||||||||
Cash
- End of Period
|
$ | 10,297 | $ | 18,543 | $ | 10,297 | ||||||
Supplemental
Disclosure of Cash Flow Information:
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
taxes
|
$ | - | $ | - | $ | - |
The
accompanying notes to financial statements are an integral part of these
statements.
F-6
HAVAYA
CORP.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2010 AND DECEMBER 31, 2009
1.
Summary of
Significant Accounting Policies
Basis
of Presentation and Organization
Havaya
Corp. (the “Company”) is in the development stage, and has limited operations.
The Company was incorporated under the laws of the State of Delaware on November
21, 2007 and began activity in 2008. The business plan of the Company is to
import and market home teeth whitening kits. The accompanying financial
statements of the Company were prepared from the accounts of the Company under
the accrual basis of accounting.
Cash and Cash
Equivalents
For
purposes of reporting within the statement of cash flows, the Company considers
all cash on hand, cash accounts not subject to withdrawal restrictions or
penalties, and all highly liquid debt instruments purchased with a maturity of
three months or less to be cash and cash equivalents.
Revenue
Recognition
The Company is in the development stage
and has yet to realize revenues from operations. Once the Company has commenced
operations, it will recognize revenues when delivery of goods or completion of
services has occurred provided there is persuasive evidence of an agreement,
acceptance has been approved by its customers, the fee is fixed or determinable
based on the completion of stated terms and conditions, and collection of any
related receivable is probable.
Loss
per Common Share
Basic
loss per share is computed by dividing the net loss attributable to the common
stockholders by the weighted average number of shares of common stock
outstanding during the period. Fully diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. There were no dilutive financial instruments issued or outstanding for
the period ended December 31, 2010.
Income
Taxes
The
Company accounts for income taxes pursuant to FASB ASC 740. Deferred tax assets
and liabilities are determined based on temporary differences between the bases
of certain assets and liabilities for income tax and financial reporting
purposes. The deferred tax assets and liabilities are classified according to
the financial statement classification of the assets and liabilities generating
the differences.
The
Company maintains a valuation allowance with respect to deferred tax assets. The
Company establishes a valuation allowance based upon the potential likelihood of
realizing the deferred tax asset and taking into consideration the Company’s
financial position and results of operations for the current period. Future
realization of the deferred tax benefit depends on the existence of sufficient
taxable income within the carry forward period under the Federal tax
laws.
F-7
Changes
in circumstances, such as the Company generating taxable income, could cause a
change in judgment about the realizability of the related deferred tax asset.
Any change in the valuation allowance will be included in income in the year of
the change in estimate.
Fair
Value of Financial Instruments
The
Company estimates the fair value of financial instruments using the available
market information and valuation methods. Considerable judgment is required in
estimating fair value. Accordingly, the estimates of fair value may not be
indicative of the amounts the Company could realize in a current market
exchange. As of December 31, 2010 and December 31, 2009, the carrying
value of accounts payable-trade and accrued liabilities approximated fair value
due to the short-term nature and maturity of these instruments.
Deferred
Offering Costs
The
Company defers as other assets the direct incremental costs of raising capital
until such time as the offering is completed. At the time of the completion of
the offering, the costs are charged against the capital raised. Should the
offering be terminated, deferred offering costs are charged to operations during
the period in which the offering is terminated.
Common
Stock Registration Expenses
The
Company considers incremental costs and expenses related to the registration of
equity securities with the SEC, whether by contractual arrangement as of a
certain date or by demand, to be unrelated to original issuance transactions. As
such, subsequent registration costs and expenses are reflected in the
accompanying financial statements as general and administrative expenses, and
are expensed as incurred.
Lease
Obligations
All
non-cancellable leases with an initial term greater than one year are
categorized as either capital leases or operating leases. Assets recorded under
capital leases are amortized according to the methods employed for property and
equipment or over the term of the related lease, if shorter.
Estimates
The
financial statements are prepared on the basis of accounting principles
generally accepted in the United States. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of December 31, 2010 and December 31, 2009, and expenses for the
period ended December 31, 2010 and 2009, and cumulative from inception. Actual
results could differ from those estimates made by management.
Fiscal
Year End
The
Company has adopted a fiscal year end of December 31.
2.
Development Stage
Activities and Going Concern
The
Company is currently in the development stage, and has not commenced operations.
The business plan of the Company is to import and market home teeth whitening
kits.
F-8
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which contemplate
continuation of the Company as a going concern. The Company has not established
any source of revenues to cover its operating costs, and as such, has incurred
an operating loss since inception. Further, as of December 31, 2010 the cash
resources of the Company were insufficient to meet its current business plan.
These and other factors raise substantial doubt about the Company’s ability to
continue as a going concern. The accompanying financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the possible inability of the Company to
continue as a going concern.
3.
Common
Stock
On July
15, 2008, the Company issued 3,000,000 shares of common stock to an officer and
director of the Company, for cash payment of $300.
On
November 24, 2008, the Company issued 500,000 shares of common stock to an
officer and director of the Company, for cash payment of $50.
On
January 31, 2009, the Company began a capital formation activity through a PPO,
exempt from registration under the Securities Act of 1933, to raise up to
$40,000 through the issuance of 2,000,000 shares of its common stock, par value
$0.0001 per share, at an offering price of $0.02 per share. As of December 31,
2009, the Company had received $40,000 in proceeds from the PPO.
On April
22, 2010, the Company issued 1,000,000 shares of common stock to officers and
directors of the Company, for cash payment of $20,000.
The
Company submitted a Registration Statement on Form S-1 to the Securities and
Exchange Commission (“SEC”) to register 2,000,000 of its outstanding shares of
common stock on behalf of selling stockholders. The Company will not receive any
of the proceeds of this registration activity once the shares of common stock
are sold by selling stockholders. The Registration Statement became effective on
November 12, 2010.
4.
Income
Taxes
The
provision (benefit) for income taxes for the periods ended December 31, 2010 and
December 31, 2009 was as follows (assuming a 23% effective tax
rate):
2010
|
2009
|
|||||||
Current
Tax Provision:
|
||||||||
Federal-
|
||||||||
Taxable
income
|
$ | - | $ | - | ||||
Total
current tax provision
|
$ | - | $ | - | ||||
Deferred
Tax Provision:
|
||||||||
Federal-
|
||||||||
Loss
carryforwards
|
$ | 9,722 | $ | 6,174 | ||||
Change
in valuation allowance
|
(9,722 | ) | (6,174 | ) | ||||
Total
deferred tax provision
|
$ | - | $ | - |
The
Company had deferred income tax assets as of December 31, 2010 and December 31,
2009, as follows:
F-9
2010
|
2009
|
|||||||
Loss
carryforwards
|
$ | 16,503 | $ | 6,781 | ||||
Less
- Valuation allowance
|
(16,503 | ) | (6,781 | ) | ||||
Total
net deferred tax assets
|
$ | - | $ | - |
The
Company provided a valuation allowance equal to the deferred income tax assets
for the periods ended December 31, 2010 and December 31, 2009 because it is not
presently known whether future taxable income will be sufficient to utilize the
loss carryforwards.
As of
December 31, 2010, the Company had approximately $71,751 in tax loss
carry-forwards that can be utilized in future periods to reduce taxable income,
and expire by the year 2030.
The
Company did not identify any material uncertain tax positions on tax returns
that were or will be filed. The Company did not recognize any interest or
penalties for unrecognized tax benefits during the years ended December 31, 2010
and 2009.
The
federal income tax returns of the Company are subject to examination by the IRS,
generally for three years after they are filed.
5. Related
Party Loans and Transactions
On July
15, 2008, the Company issued 3,000,000 shares of common stock to an officer and
director of the Company, for cash payment of $300.
On
November 24, 2008, the Company issued 500,000 shares of common stock to an
officer and director of the Company, for cash payment of $50.
On April
22, 2010, the Company issued 1,000,000 shares of common stock to officers and
directors of the Company, for cash payment of $20,000.
As of
December 31, 2010, loans from related parties amounted to $5,754, and
represented working capital advances from officers who are also stockholders of
the Company. The loans are unsecured, non-interest bearing, and due on
demand.
6.
Recent Accounting
Pronouncements
In April
2010, the FASB issued ASU No. 2010-17, Revenue Recognition—Milestone
Method (ASU 2010-017). ASU 2010-017 provides guidance in applying the
milestone method of revenue recognition to research or development arrangements.
This guidance concludes that the milestone method is a valid application of the
proportional performance model when applied to research or development
arrangements. Accordingly, an entity can make an accounting policy election to
recognize a payment that is contingent upon the achievement of a substantive
milestone in its entirety in the period in which the milestone is achieved. The
guidance is effective for fiscal years, and interim periods within those years,
beginning on or after June 15, 2010. The adoption of this accounting
standard had no impact on the Company's financial position or results of
operations.
In
February 2010, the FASB issued amended guidance on subsequent events. Under this
amended guidance, SEC filers are no longer required to disclose the date through
which subsequent events have been evaluated in originally issued and revised
financial statements. This guidance was effective immediately and the Company
adopted these new requirements upon issuance of this guidance.
F-10
In
January 2010, the FASB issued Accounting Standards Update (ASU)
No. 2010-06, Fair Value
Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value
Measurements (ASU No. 2010-06). ASU No. 2010-06 requires:
(1) fair value disclosures of assets and liabilities by class;
(2) disclosures about significant transfers in and out of Levels 1 and
2 on the fair value hierarchy, in addition to Level 3; (3) purchases,
sales, issuances, and settlements be disclosed on gross basis on the
reconciliation of beginning and ending balances of Level 3 assets and
liabilities; and (4) disclosures about valuation methods and inputs used to
measure the fair value of Level 2 assets and liabilities. ASU
No. 2010-06 becomes effective for the first financial reporting period
beginning after December 15, 2009, except for disclosures about purchases,
sales, issuances, and settlements of Level 3 assets and liabilities which
will be effective for fiscal years beginning after December 15, 2010. The
adoption of this accounting standard had no impact on the Company's financial
position or results of operations.
In
October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic
605)—Multiple-Deliverable Revenue Arrangements: a consensus of the FASB Emerging
Issues Task Force (ASU 2009-13). ASU 2009-13 establishes a selling-price
hierarchy for determining the selling price of each element within a
multiple-deliverable arrangement. Specifically, the selling price assigned to
each deliverable is to be based on vendor-specific objective evidence (VSOE) if
available, third-party evidence, if VSOE is unavailable, and estimated selling
prices if neither VSOE or third-party evidence is available. In addition, ASU
2009-13 eliminates the residual method of allocating arrangement consideration
and instead requires allocation using the relative selling price method. ASU
2009-13 will be effective prospectively for multiple-deliverable revenue
arrangements entered into, or materially modified, in fiscal years beginning on
or after June 15, 2010 The adoption of this
accounting standard had no impact on the Company's financial position or results
of operations.
In August
2009, the FASB issued ASU No. 2009-05, Fair Value Measurements and
Disclosures (Topic 820)—Measuring Liabilities at Fair Value (ASU 2009-05). ASU
2009-05 provides guidance in measuring the fair value of a liability when a
quoted price in an active market does not exist for an identical liability or
when a liability is subject to restrictions on its transfer. ASU 2009-15 was
effective for the Company beginning with the quarter ended December 31,
2009. The adoption
of this accounting standard had no impact on the Company's financial position or
results of operations.
7. Concentration of Credit
Risk
The
Company’s cash and cash equivalents are invested in a major bank
in Israel and are not insured. Management believes that the financial
institution that holds the Company’s investments is financially sound.
Accordingly, minimal credit risk exists with respect to these
investments.
F-11