Attached files
| file | filename |
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| EX-32 - HAVAYA CORP | v220830_ex32.htm |
| EX-31 - HAVAYA CORP | v220830_ex31.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2011
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________ to ____________
Commission file number: 333-165083
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HAVAYA CORP.
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(Exact name of Registrant as specified in its charter)
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Delaware
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74-3245242
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(State or other jurisdiction of incorporation or
organization)
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(IRS Employer Identification No.)
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51 Sheshet Hayamim St., Kfar Saba, 44269 Israel
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(Address of principal executive offices) (zip code)
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1-800-878-5756
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(Registrant’s telephone number, including area code)
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N/A
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(Former name, former address and former fiscal year, if changed since last report)
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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 ¨ No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ¨ No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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x
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of May 3, 2011, there were 6,500,000 shares of the Registrant's common stock issued and outstanding.
HAVAYA CORP.
TABLE OF CONTENTS
| Part I—Financial Information | ||
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Item 1. Financial Statements - Unaudited
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3 | |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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4
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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6
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Item 4. Controls and Procedures
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6
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Part II – Other Information
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Item 1. Legal Proceedings
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6
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Item 1A. Risk Factors
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6
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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6
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Item 3. Defaults upon Senior Securities
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6
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Item 4. (Removed and Reserved)
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6
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Item 5. Other Information
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7
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Item 6. Exhibits
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7
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Signatures
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8
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- 2 -
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements – (Unaudited)
INDEX TO FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
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Financial Statements-
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Balance Sheets as of March 31, 2011 and December 31, 2010
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F-1 | |||
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Statements of Operations for the Three Months Ended
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March 31, 2011 and 2010, and Cumulative from Inception
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F-2 | |||
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Statement of Stockholders’ Equity for the Period from Inception
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Through of March 31, 2011
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F-3 | |||
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Statements of Cash Flows for Three Months Ended March 31, 2011 and 2010
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and Cumulative from Inception
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F-4 | |||
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Notes to Financial Statements
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F-5 | |||
- 3 -
HAVAYA CORP.
(A DEVELOPMENT STAGE COMPANY)
AS OF MARCH 31, 2011 AND DECEMBER 31, 2010
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March 31, 2011
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December 31, 2010
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(Unaudited)
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(Audited)
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$ | 118,642 | $ | 10,297 | ||||
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Prepaid expenses
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62 | 62 | ||||||
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Total current assets
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118,704 | 10,359 | ||||||
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Total Assets
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$ | 118,704 | $ | 10,359 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
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Accounts payable and accrued liabilities
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$ | 20,086 | $ | 16,036 | ||||
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Due to shareholders
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6,124 | 5,724 | ||||||
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Advance customer payments
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113,475 | - | ||||||
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Total current liabilities
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139,685 | 21,760 | ||||||
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Total liabilities
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139,685 | 21,760 | ||||||
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Commitments and Contingencies
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- | - | ||||||
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Stockholders' Equity (Deficit):
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Common stock, par value $0.0001 per share, 200,000,000 shares authorized; 6,500,000 shares issued and outstanding
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650 | 650 | ||||||
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Additional paid-in capital
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59,700 | 59,700 | ||||||
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(Deficit) accumulated during development stage
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(81,331 | ) | (71,752 | ) | ||||
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Total stockholders' equity (deficit)
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(20,981 | ) | (11,402 | ) | ||||
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Total Liabilities and Stockholders' Equity
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$ | 118,704 | $ | 10,358 | ||||
The accompanying notes to financial statements are
an integral part of these statements.
F-1
HAVAYA CORP.
(A DEVELOPMENT STAGE COMPANY)
FOR THREE MONTHS ENDED MARCH 31, 2011 AND 2010, AND
CUMULATIVE FROM INCEPTION (NOVEMBER 21, 2007)
THROUGH MARCH 31, 2011
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Cumulative
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Three Months Ended
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Three Months Ended
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From
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March 31, 2011
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March 31, 2010
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Inception
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Revenues
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$ | - | $ | - | $ | - | ||||||
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Expenses:
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General and administrative-
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Marketing expenses
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- | - | 1,152 | |||||||||
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Professional fees
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5,005 | 6,898 | 42,826 | |||||||||
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Consulting fees
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- | - | 5,000 | |||||||||
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Travel expenses
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5,041 | - | 21,746 | |||||||||
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Organization costs
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- | - | 1,500 | |||||||||
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Filing Fees
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529 | 1,413 | 10,233 | |||||||||
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Franchise tax expense
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400 | 686 | ||||||||||
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Other
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94 | 219 | 1,419 | |||||||||
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Total general and administrative expenses
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11,069 | 8,529 | 84,561 | |||||||||
| - | ||||||||||||
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Net Income (Loss) from Operations
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(11,069 | ) | (8,529 | ) | (84,561 | ) | ||||||
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Other Income (Expense)
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Gains (loss) on foreign currency exchange
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1,489 | 88 | 3,230 | |||||||||
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Provision for income taxes
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- | - | - | |||||||||
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Net Income (Loss)
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$ | (9,580 | ) | $ | (8,441 | ) | $ | (81,331 | ) | |||
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Net Income (Loss) Per Common Share:
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(Loss) per common share - Basic and Diluted
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$ | (0.00 | ) | $ | (0.00 | ) | ||||||
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Weighted Average Number of Common Shares Outstanding - Basic and Diluted
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6,500,000 | 5,500,000 | ||||||||||
The accompanying notes to financial statements are
an integral part of these statements.
F-2
HAVAYA CORP.
(A DEVELOPMENT STAGE COMPANY)
FOR THE PERIOD FROM INCEPTION (NOVEMBER 21, 2007)
THROUGH MARCH 31, 2011
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(Deficit)
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Accumulated
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Stock
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Additional
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During the
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Common stock
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Subscriptions
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Paid-in
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Development
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Description
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Shares
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Amount
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Receivable
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Capital
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Stage
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Totals
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Balance - at inception
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- | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
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Common stock issued for cash
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3,000,000 | 300 | - | - | - | 300 | ||||||||||||||||||
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Common stock issued for cash
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500,000 | 50 | - | - | - | 50 | ||||||||||||||||||
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Stock Subscriptions Receivable
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- | - | (350 | ) | - | - | (350 | ) | ||||||||||||||||
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Net (loss) for the period
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- | - | - | - | (2,640 | ) | (2,640 | ) | ||||||||||||||||
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Balance - December 31, 2008
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3,500,000 | 350 | (350 | ) | - | (2,640 | ) | (2,640 | ) | |||||||||||||||
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Common stock issued for cash
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2,000,000 | 200 | - | 39,800 | - | 40,000 | ||||||||||||||||||
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Net (loss) for the period
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- | - | - | - | (26,842 | ) | (26,842 | ) | ||||||||||||||||
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Balance -December 31, 2009
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5,500,000 | $ | 550 | $ | (350 | ) | $ | 39,800 | $ | (29,482 | ) | $ | 10,518 | |||||||||||
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Stock Subscriptions received
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- | 350 | - | - | 350 | |||||||||||||||||||
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Common stock issued for cash
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1,000,000 | 100 | - | 19,900 | - | 20,000 | ||||||||||||||||||
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Net (loss) for the period
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- | - | - | - | (42,269 | ) | (42,269 | ) | ||||||||||||||||
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Balance -December 31, 2010
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6,500,000 | $ | 650 | $ | - | $ | 59,700 | $ | (71,752 | ) | $ | (11,402 | ) | |||||||||||
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Net (loss) for the period
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- | - | - | - | (9,580 | ) | (9,580 | ) | ||||||||||||||||
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Balance -March 31, 2011
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6,500,000 | $ | 650 | $ | - | $ | 59,700 | $ | (81,331 | ) | $ | (20,981 | ) | |||||||||||
The accompanying notes to financial statements are
an integral part of these statements.
F-3
HAVAYA CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THREE MONTHS ENDED MARCH 31, 2011 AND 2010, AND CUMULATIVE FROM INCEPTION (NOVEMBER 21, 2007)
THROUGH MARCH 31, 2011
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Cumulative
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Three Months Ended
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Three Months Ended
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From
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March 31, 2011
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March 31, 2010
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Inception
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Operating Activities:
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Net (loss)
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$ | (9,580 | ) | $ | (8,441 | ) | $ | (81,331 | ) | |||
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Adjustments to reconcile net (loss) to net cash provided by operating activities:
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Changes in net assets and liabilities-
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Prepaid expenses
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- | (1,557 | ) | (62 | ) | |||||||
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Accounts payable and accrued liabilities
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4,050 | (2,022 | ) | 20,086 | ||||||||
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Advance customer payments
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113,475 | - | 113,475 | |||||||||
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Net Cash Provided/(Used) in Operating Activities
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107,946 | (12,020 | ) | 52,168 | ||||||||
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Investing Activities:
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Cash used by investing activities
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- | - | - | |||||||||
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Net Cash Used by Investing Activities
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- | - | - | |||||||||
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Financing Activities:
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Proceeds from shareholder loans
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400 | - | 6,124 | |||||||||
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Proceeds from common stock
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- | 350 | 60,350 | |||||||||
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Net Cash Provided by Financing Activities
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400 | 350 | 66,474 | |||||||||
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Net (Decrease) Increase in Cash
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108,346 | (11,670 | ) | 118,642 | ||||||||
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Cash - Beginning of Period
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10,297 | 18,543 | - | |||||||||
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Cash - End of Period
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$ | 118,642 | $ | 6,872 | $ | 118,642 | ||||||
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Supplemental Disclosure of Cash Flow Information:
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Cash paid during the period for: Interest
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$ | - | $ | - | $ | - | ||||||
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Income taxes
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$ | - | $ | - | $ | - | ||||||
The accompanying notes to financial statements are an integral part of these statements.
F-4
HAVAYA CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
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.
Unaudited Interim Financial Statements
The interim financial statements of the Company as of March 31, 2011, and for the periods then ended, and cumulative from inception, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2011, and the results of its operations and its cash flows for the periods ended March 31, 2011, and cumulative from inception. These results are not necessarily indicative of the results expected for the calendar year ending December 31, 2011. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited financial statements as of December 31, 2010, filed with the SEC, for additional information, including significant accounting policies.
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 March 31, 2011.
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 carryforward period under the Federal tax laws.
F-5
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 March 31 and 2011, December 31, 2010, 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 March 31, 2011 and December 31, 2010, and expenses for the three months ended March 31, 2011 and 2010, 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
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.
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.
F-6
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.
The Company also commenced an activity to submit 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.
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 $20,000.
4. Income Taxes
The provision (benefit) for income taxes for the periods ended March 31, 2011 and 2010 was as follows (assuming a 23% effective tax rate):
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2011
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2010
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Current Tax Provision:
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Federal-
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Taxable income
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$ | - | $ | - | ||||
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Total current tax provision
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$ | - | $ | - | ||||
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Deferred Tax Provision:
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Federal-
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Loss carryforwards
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$ | 2,203 | $ | 1,942 | ||||
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Change in valuation allowance
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(2,203 | ) | (1,942 | ) | ||||
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Total deferred tax provision
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$ | - | $ | - | ||||
The Company had deferred income tax assets as of December 31, 2010 and 2009, as follows:
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2011
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2010
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Loss carryforwards
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$ | 18,706 | $ | 16,503 | ||||
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Less - Valuation allowance
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(18,706 | ) | (16,503 | ) | ||||
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Total net deferred tax assets
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$ | - | $ | - | ||||
The Company provided a valuation allowance equal to the deferred income tax assets for the periods ended December 31, 2010 because it was not known whether future taxable income will be sufficient to utilize the loss carryforwards.
As of March 31, 2011, the Company had approximately $81,331 in tax loss carry-forwards that can be utilized in future periods to reduce taxable income, and expire by the year 2031.
The Company did not identify any material uncertain tax positions on tax returns that were filed. The Company did not recognize any interest or penalties for unrecognized tax benefits.
The federal income tax returns of the Company are subject to examination by the IRS, generally for three years after they are filed.
F-7
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 March 31, 2011, loans from related parties amounted to $6,124, 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.
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, 2010The 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.
F-8
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.
8. Subsequent Event
On April 14, 2011, the Company entered into a license agreement with an Israeli corporation, (“CTL”), pursuant to which the Company granted CTL an exclusive license to sell teeth whitening kits/systems under the Havaya brand name in the State of Israel. Under the Agreement, the Company also agreed to provide CTL with support and assistance relating to the sale of the Products in Israel.
In consideration for the grant of the exclusive license, CTL paid the Company a one-time license fee of $110,000. In addition, CTL will pay the Company a fee on the sale of each Product sold in Israel in an amount equal to 5% of the Product purchase price. CTL will purchase Products either from the Company or from the Company’s supplier at the same price that the Company pays for the Products.
The Agreement has an initial term of 12 months, and the term shall automatically renew each year for an additional year unless one party provides the other party with prior written notice of non-renewal.
F-9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
Certain statements that the Company may make from time to time, including all statements contained in this report that are not statements of historical fact, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the safe harbour provisions set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words such as “plans,” “expects,” “believes,” “anticipates,” “estimates,” “projects,” “will,” “should,” and other words of similar meaning used in conjunction with, among other things, discussions of future operations, financial performance, product development and new product launches, market position and expenditures. The Company assumes no obligation to update any forward-looking statements.Additional information concerning factors which could cause differences between forward-looking statements and future actual results is discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 3, 2011.
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. Except for the revenues we have earned from our first licensee as advance payments, we do not anticipate that we will generate additional revenues until we receive license fees from our licensee or we are able to market the private label teeth whitening kits and generate customers.
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 not need to raise any additional funds to implement our marketing plan and to remain in business for twelve months. Except for the advance payments, we expect to begin to generate additional revenues during the third quarter of 2011. 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.
Our goal is to become a leading seller of teeth whitening kits for the home market. Our plan of operation is as follows:
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Commence a test marketing campaign
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Market our teeth whitening kits with a campaign which will entail advertising on cable TV and through internet marketing.
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Purchase privately labeled teeth whitening kits for resale to customers.
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Recent Developments
On April 14, 2011, the Company entered into a license agreement with an Israeli corporation, (“CTL”), pursuant to which the Company granted CTL an exclusive license to sell teeth whitening kits/systems under the Havaya brand name in the State of Israel. Under the Agreement, the Company also agreed to provide CTL with support and assistance relating to the sale of the Products in Israel.
In consideration for the grant of the exclusive license, CTL paid the Company a one-time license fee of $110,000. In addition, CTL will pay the Company a fee on the sale of each Product sold in Israel in an amount equal to 5% of the Product purchase price. CTL will purchase Products either from the Company or from the Company’s supplier at the same price that the Company pays for the Products.
The Agreement has an initial term of 12 months, and the term shall automatically renew each year for an additional year unless one party provides the other party with prior written notice of non-renewal.
Results of Operations
During the period from November 21, 2007 (date of inception) through March 31, 2011, we generated net loss from operations in the amount of $84,561. During the three months ended March 31, 2011, we incurred expenses in the amount of $11,069. These expenses 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.
Revenues
We had no revenues for the period from November 21, 2007 (date of inception) through March 31, 2011. We have received advanced payments in the amount of $113,475.
Liquidity and Capital Resources
Our balance sheet as of March 31, 2011 reflects assets of $118,704 which primarily consist of cash and cash equivalents. Prior to the signing of the license agreement on April 14, 2011, cash and cash equivalents from inception to date have been insufficient to provide the working capital necessary to operate to date.
If we require additional capital, we would have to issue debt or equity or enter into a strategic arrangement with a third party. 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.
Going Concern Consideration
Our independent auditors included an explanatory paragraph in their report on the financial statements attached to our Annual Report on Form 10-K regarding concerns about our ability to continue as a going concern. Our financial statements for the fiscal period ended March 31, 2011 does not contain a going concern consideration due to the fact that management expects the cash received as an advanced payment, plus royalties on future sales by CTL, to be sufficient to fund operations for the next year.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.
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Development Stage Company
We are considered a development stage company as defined by ASC 915 “Development Stage Entities,” as we have no principal operations or revenue from any source. Operations from the inception of the development stage have been devoted primarily to strategic planning, raising capital and research and development activities.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president (who is acting as our principal executive officer) and our chief financial officer (who is acting as our principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of March 31, 2011, the end of the three-month period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our management, including our president and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and our chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
There have been no significant changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. However, from time to time, we may become a party to certain legal proceedings in the ordinary course of business.
Item 1A. Risk Factors.
Not Applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item3. Defaults Upon Senior Securities.
None.
Item4. (Removed and Reserved).
Not applicable.
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Item5. Other Information.
None.
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Exhibit No.
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Description
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3.1
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Articles of Incorporation (Incorporated by reference from our Registration Statement on Form S-1).
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3.2
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Bylaws (Incorporated by reference from our Registration Statement on Form S-1).
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4.1
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Specimen ordinary share certificate (Incorporated by reference from our Registration Statement on Form S-1).
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10.1
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License Agreement between Havaya Corp. and Chelsea Tech Ltd., dated April 14, 2011 (Incorporated by reference from our Current Report on Form 8-K filed on April 14, 2011).
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31*
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Section 302 Certification of the Sarbanes-Oxley Act of 2002 of Avraham Grundman.
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32*
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Section 906 Certification of the Sarbanes-Oxley Act of 2002 of Avraham Grundman.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 4, 2011
HAVAYA CORP.
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/s/ Avraham Grundman
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Avraham Grundman
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President, Chief Executive Officer, Chief Financial Officer and a member of the Board of Directors
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(who also performs as the Principal Executive and Principal Financial and Accounting Officer)
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May 4, 2011
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