As filed with the Securities and Exchange Commission on December 21, 1999
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HARMONY TRADING CORP.
(Name of small business issuer in its charter)
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New York 5621 13-3935933
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification Identification
incorporation or organization) Code Number) No.)
8 Harmony Lane, Hartsdale, NY, 10530; (914) 686-8255
(Address and telephone number of principal executive offices)
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8 Harmony Lane, Hartsdale, NY, 10530; (914) 686-8255
(Address of principal place of business or intended principal place of business)
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Paul B. Gottbetter
8 Harmony Lane, Hartsdale, NY, 10530; (914) 686-8255
(Name, address, and telephone number of agent for service)
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Approximate date of commencement of proposed sale to public: From time to
time the effective date of this registration statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box: |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to the Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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With copies to:
Adam S. Gottbetter, Esq.
Kaplan Gottbetter & Levenson, LLP
630 Third Avenue, 5th Floor
New York, NY 10017-6705
(212) 983-6900
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Amount Maximum Maximum Amount of
to be Offering Price Aggregate Registration
Title of each Class of Securities Being Registered Registered Per Security(1) Offering Price(1) Fee
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<S> <C> <C> <C> <C> <C>
Common Stock, par value, $.001 per share ................... 265,000 $.05 $13,250 $4.00
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TOTAL......................................................................................... $13,250 $4.00
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(1) Estimated solely for purposes of calculating the registration fee in the
case of shares being sold by selling shareholders,
(2) See below for proposed maximum price per share, proposed maximum offering
price and amount of registration fee.
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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to Section
8(a), may determine.
================================================================================
<PAGE>
This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
PROSPECTUS
HARMONY TRADING CORP.
265,000 Shares Common Stock
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This prospectus relates to the sale of up to approximately 265,000 shares
of our common stock offered for the account of the selling shareholders. We are
registering the sale of these shares of common stock to provide the selling
stockholders with freely tradable securities, but this registration does not
necessarily mean that the selling stockholders will offer or sell the shares.
We will not receive any proceeds from the sale of the shares by the
selling stockholders. We have agreed to pay all registration expenses.
Thirty-six (36) of our Forty-four (44) shareholders are selling 265,000
shares they own.
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This investment involves a high degree of risk. You should purchase these
securities only if you can afford a complete loss. See "Risk factors" beginning
on page 3 to read about factors you should consider before buying any of these
securities.
Neither the Securities and Exchange Commission nor any State securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The selling stockholders from time to time may offer and sell the shares
they hold through agents or broker-dealers, or directly to one or more
purchasers, at market prices prevailing at the time of sale or at prices
otherwise negotiated. The selling stockholders reserve the sole right to accept
or reject, in whole or in part, any proposed purchase of the shares to be made
directly or through agents.
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December , 1999
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PROSPECTUS SUMMARY
This is a brief summary of the information in this prospectus. We
encourage you to read the entire prospectus before you decide whether and how
much to invest in these securities.
HARMONY TRADING CORP.
The business of Harmony is the direct selling of Doncaster women's apparel
and accessories. Doncaster is a division of Tanner Companies, which is based in
Rutherfordton, North Carolina. Direct selling is the sale of a consumer product
or service in a face to face manner away from a fixed retail location. Harmony,
through its two (2) independent contractors, Falene Gottbetter and Roberta
Winley, markets Doncaster's line of clothing through fashion shows and private
appointments.
We are essentially in the business of :
o Selling Doncaster women's apparel and accessories; and
o acting as fashion consultants.
Harmony was formed in 1996 and has had only limited operations to date.
Our offices are at 8 Harmony Lane, Hartsdale, New York 10530, telephone (914)
686-8255.
THE OFFERING
Securities Offered:
Common Stock Offered by Selling Shareholders 265,000 shares
The selling shareholders may offer their shares directly to investors or,
if a market develops in our common stock, they may sell their shares through a
broker.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the securities by the
selling shareholders.
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FORWARD-LOOKING STATEMENTS
Some information in this prospectus may contain forward-looking
statements. You can identify these statements by their forward-looking
terminology such as "may," "will," "expect," "anticipate," "continue," or other
similar words. Forward-looking statements discuss future expectations, contain
projections of results of operations or of financial condition or state other
"forward-looking" information. When considering forward-looking statements in
this prospectus, you should keep in mind the risk factors and other cautionary
statements included in this prospectus. The risk factors noted in the "Risk
Factors" section and the other factors noted throughout this prospectus, could
cause our actual results to differ materially from those contained in any
forward-looking statement.
RISK FACTORS
An investment in the securities that are being offered involves a high
degree of risk and should only be made by those who can afford to lose up
to their entire investment. Before purchasing these securities, you should
consider carefully the following risk factors, in addition to the other
information in this prospectus.
Risks Inherent in Harmony's Business
Risks relating to the Company's business being operated on a part-time
basis. The Company's business consists essentially of the sale of high fashion
women's clothing by two women on a commission basis, operating from the home of
one of the two. The business is conducted on a part-time basis and for one of
the women, the income derived from the Company's business is part of her income
to meet regular personal expenses. One of the two people providing services to
the Company has other sources of income or support. To the extent the Company
derives commissions from its sales activities, those commissions are expected to
be paid in substantial part or all in the form of commissions to the two
individuals making the sales. Accordingly, it is unlikely that the Company will
generate any profit for investors from its business operations as those
operations are presently conducted.
The Company's commission revenue is heavily dependent upon personal
relationships of its two independent contractors. A very substantial portion of
the commission revenue generated by the Company is a result of sales to family,
friends and acquaintances of the Company's two independent contractors. While
the Company has been making efforts to expand its mailing list, sales are likely
to be based largely on personal and family relationships for the foreseeable
future. As a result, loss of the services of either of the Company's two
independent contractors would probably result in substantial drops in the
Company's commission revenue.
The Company's relationship with its primary source of sales is severally
dependent upon personal relationships of its two independent contractors. The
Company's operations are based
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entirely on its ability to get high-fashion designs from a single manufacturer.
The Company's ability to continue getting those designs is dependent upon the
personal relationships of its two independent contractors with the individuals
controlling its source of supply. As a result, loss of the services of either of
the independent contractors, or a deterioration in the personal relationships
with principals of the supplier could reduce or eliminate the Company's ability
to get the necessary goods.
We are a new business and our management has not run a business exactly
like this before. Harmony has had very limited operations to date. It is at an
early stage of development in its business strategy and is subject to all of the
risks of a new business enterprise. Although, Harmony's president has accounting
and legal clients in the clothing industry, he has never operated an apparel
business.
Sensitivity To Economic Conditions and Consumer Confidence. The specialty
retail industry is highly dependent upon the level of consumer spending,
particularly among affluent customers, and may be adversely affected by an
economic downturn, increases in consumer debt levels, uncertainties regarding
future economic prospects, or a decline in consumer confidence. An economic
downturn which effects our clients, could have a material adverse effect on our
business.
Changing Consumer Preferences. Our success depends in substantial part
upon Doncaster's ability to anticipate and respond to changing consumer
preferences and fashion trends in a timely manner. Although Doncaster attempts
to stay abreast of emerging lifestyle and consumer preferences affecting its
merchandise, any failure by Doncaster to identify and respond to such trends
could have a material adverse effect on the our business.
Dependence on Supply. We have no guaranteed supply arrangements with
Doncaster and orders are filled on a "first-come, first-serve" basis by
Doncaster. The inability to fill our customer's order will have an adverse
effect on our business because our revenues are based on commissions on what we
sell.
Competition. The specialty retail industry is highly competitive and
fragmented. We compete with large specialty retailers, traditional and better
department stores, national apparel chains, designer boutiques, individual
specialty apparel stores and direct marketing firms. We compete for customers
principally on the basis of quality, assortment and presentation of merchandise,
customer service, marketing programs and value. Most of Doncaster's and our
competitors are larger and have greater financial resources than we have.
Our business is dependent on a limited number of key personnel. Harmony is
dependent for its success on the talent, expertise and experience of its
president and its two independent contractors. Losing the services of any of
these people could adversely affect on our operations and prospects. Mesdames
Gottbetter's and Winley's continued involvement is particularly critical to us.
We do not have any agreements with Mr. Paul Gottbetter, Mrs. Gottbetter or Ms.
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Winley, though we may in the future. We do not currently have any "key man" life
insurance on any of these people, any nor do we expect to get such insurance for
them.
No dividends are expected for some time. We do not expect to pay cash
dividends on our common stock in the foreseeable future. We intend to retain any
earnings to develop and extend our business. Under the Business Corporation Law
of the State of New York, we may only pay dividends out of surplus. If the
required surplus is not available, we will not be able to legally pay dividends.
We may not be able to pay dividends even if we should decide to do so.
Year 2000 risks could temporarily interfere with our operations . The Year
2000 issue involves the potential for system and processing failures of
date-related data because computer-controlled systems use two digits rather than
four to define the applicable year. For example, computer programs that contain
time-sensitive software may recognize a date using two digits of "00" as the
year 1900 rather than the year 2000. This could cause system failure or
miscalculations leading to disruptions of operations. As a result, we might not
be able temporarily to process transactions, send invoices or engage in similar
ordinary business activities. (See "Business of Harmony - Year 2000")
Risks Related to the Offering
There may not be a market for the securities after the offering. We do not
currently meet the requirements such as income, shareholders' equity and number
of public shares outstanding, to have our shares listed on a stock exchange in
the United States or quoted on the NASDAQ over-the-counter market. We have a
market-maker who is willing to make a market in our common stock once the stock
becomes distributed sufficiently, but we cannot give any assurance that we will
achieve sufficient distribution for the market maker. Consequently, the
securities may be an illiquid long-term investment.
Any market for the shares which does develop make be illiquid. There may
be only a limited trading market for the shares being offered. We expect that
initially any market will be on the NASD OTC Bulletin Board. Shares which are
"thinly" traded on the Bulletin Board often trade only infrequently and
experience a significant spread between the market maker's bid and ask prices.
As a result, an investment in the shares may be illiquid even if there is a
market. In addition, the price of the shares, after the offering, can vary due
to general economic conditions and forecasts, our general business condition,
the release of our financial reports, and because our principals may sell shares
they owned before the offering into any market that develops. See "Shares
Eligible For Future Resale."
State blue sky requirements may limit resales of the securities. State
restrictions on resales may limit the ability of investors to resell the
securities purchased in this offering. (See "Plan of Distribution.")
Future sales of common stock or senior securities. We may issue additional
capital stock in future financings. If a trading market for the common stock
were to develop, sales of substantial
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amounts of such shares of common stock or the availability of substantial
amounts of such shares for sale could adversely affect prevailing stock market
prices.
In addition, we could issue other series or classes of preferred stock
having rights, preferences and powers senior to those of the common stock,
including the right to receive dividends and/or preferences upon liquidation,
dissolution or winding-up in excess of, or prior to, the rights of the holders
of the Common Stock. This could reduce or eliminate the amounts that would
otherwise have been available to pay dividends on the common stock.
The "penny stock" rules could make selling shares more difficult. Our
common stock will be a "penny stock," under Rule 3a51-1 under the Securities and
Exchange Act, unless and until:
o the shares reach a price of at least $5.00 per share,
o we meet the financial size and volume levels for our common
stock not to be considered a penny stock, or
o we register the shares on a national securities exchange or
they are quoted on the NASDAQ system.
The shares are likely to remain penny stocks for a considerable period
after the shares that are being offered are sold. A "penny stock" is subject to
rules that require securities broker-dealers, before carrying out transactions
in any "penny stock":
o to deliver a disclosure document to the customer describing
the risks of penny stocks, and get a written receipt for that
document, before selling penny stocks to that customer;
o to disclose price information about the stock;
o to disclose the compensation received by the broker-dealer or
any associated person of the broker-dealer; and
o to send monthly statements to customers with market and price
information about the "penny stock."
Our common stock will also be subject to a rule which requires the
broker-dealer, in some circumstances, to:
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o approve the "penny stock" purchaser's account under standards
specified in the rule, and
o deliver written statements to the customer with information
specified in the rule.
These additional requirements could prevent broker-dealers from carrying
out transactions and limit the ability of the selling shareholders in this
offering to sell their shares into any secondary market for Harmony's common
stock.
Officers' and directors' liabilities are limited. We will indemnify any
officer, director or former officer or director, to the full extent permitted by
law. This could include indemnification for liabilities under securities laws
enacted for shareholder protection, though the SEC thinks this indemnification
is against public policy.
BUSINESS OF HARMONY
Harmony Trading Corp., a New York corporation, was formed on August 13,
1996. We remained inactive until December 1998, when we became a direct seller
for Doncaster, a division of Tanner Companies. Doncaster is a manufacturer of
women's apparel and accessories.
Our business is the direct selling of Doncaster women's apparel and
accessories. Doncaster is a division of Tanner Companies, which is based in
Rutherfordton, North Carolina. Direct selling is the sale of a consumer product
or service in a face to face manner away from a fixed retail location. We,
through ours two (2) independent contractors, Falene Gottbetter and Roberta
Winley, market the Doncaster line through fashion shows and private
appointments. Mr. Gottbetter, Mrs. Gottbetter and Ms. Winley devote as much time
as necessary to the business of Harmony and the amount of time varies depending
on the time of the year. Mrs. Gottbetter and Ms. Winley devote more time during
the weeks of the trunk shows and the weeks immediately after the trunk shows.
Doncaster's clothing is comparable in quality and styling to DKNY, Donna
Karan, Dana Buchman and other high end contemporary clothing lines. The style of
clothing is classic and traditional, but modern and contemporary and is made
from wool, linen, silk and cotton. The size of the clothing ranges from 2 to 18
and 2 to 14 petite, and is a fuller cut to assure true sizing and proper fit.
Doncaster's line of clothing consists of separate pieces to allow women
versatility in mixing matching items. The line includes pants, blazers,
sweaters, blouses, skirts, shorts, camisoles, and dresses. In addition,
Doncaster offers accessories including jewelry, belts and scarves. Doncaster has
four (4) seasonal collections, Spring, Spring/Summer, Fall and Fall/Winter. The
collections are introduced on the following schedule - Fall in July, Fall/Winter
in September, Spring in January, and Spring/Summer in May. Within each season's
collection,
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there are various style/theme collections. For example, the Spring /Summer 1999
collection consisted of Sloan Ranger, White Sand, Summer Essentials, Kauai
Island and Spice Market Group. The Sloan Ranger group was inspired by London's
Sloane Ranger district and featured casual coordinates in khaki, white, peach
and lilac, in solids and prints. The White Sand group consisted of very classic
pieces such as a shirtwaist dress, tailored jacket, man tailored shirt, in the
colors of white, beige and navy. The Fall 1999 collection consists of the
following: Grey Matters, Country Classics, Luxe, Fall Essentials, Haute View and
Simply Silk. In addition to slacks, sweaters, blouses, the Fall collection
includes wool jackets and a coat with a detachable fur collar.
Doncaster has been in business since 1931, and we have been a direct
seller of Doncaster clothing and accessories since December 1998.
Distribution Methods of the Products or Services.
We rely on our mailing list, referrals and national advertising by
Doncaster in order to increase our customer base. We currently have a mailing
list of approximately 200 names to which we send announcements of the four (4)
trunk shows and preview shows during the year.
The trunk show lasts for one (1) week and it is by appointment. The shows
are held at our offices which are at the home of the our president, Paul
Gottbetter. Customers make appointments to view the current collection, try on
different pieces and place orders. Each client's appointment is for one (1) hour
to one and one-half (1 1/2) hours. The client can look at various colors and
fabrics in a "look book" for the current season's collection. If a client is
unable to attend the trunk show, we will make an appointment to view the
collection at Doncaster's New York showroom. Doncaster's offices in New York
City are open during regular business hours. However, we are able to obtain
after hours access to the showroom with advance notice to Doncaster.
We forward a client's order to Doncaster by phone or fax. The customer is
not billed for the order until Doncaster ships the order to the client. The
order can be shipped directly to the client or to Doncaster's New York showroom.
Doncaster employs a dressmaker who can make alterations to the clothing.
Clothing which has not been altered or worn can be returned to Doncaster for a
full refund within thirty (30) days of receipt.
We also obtain clients from referrals by Doncaster in response to its
national advertising campaign in magazines such as Harper's Bazaar, Town &
Country and Vogue. Doncaster will give the name and telephone number of a
consultant in a potential client's area in response to calls Doncaster receives
from the public inquiring about its merchandise.
We run fashions shows for various organization such as women's groups,
church groups and other women's organizations. For each season, Doncaster
provides a fashion show set which a consultant can obtain from Doncaster's
district coordinator.
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The women's apparel retail industry is highly competitive and fragmented.
We compete with large specialty retailers, traditional and better department
stores, national apparel chains, designer boutiques, individual specialty
apparel stores and other direct marketing firms. We do not have to compete with
these other businesses for merchandise since we only order merchandise for
individual clients directly from Doncaster. However, Doncaster only manufactures
a fixed number of pieces of each item and the pieces are sold on a "first-come,
first-serve basis." Most of our competitors are larger, have greater financial
resources and a more varied selection of clothing than we do. Our success is
dependent in part upon initiating and maintaining strong relationships with our
clients and the quality and value of the Doncaster clothing.
As of December 1, 1999, we had no employees. We have two (2) independent
contractors, Falene Gottbetter and Roberta Winley. Falene Gottbetter is the wife
of our president, Paul B. Gottbetter.
Facilities
We maintain our offices at 8 Harmony Lane, Hartsdale, New York, 10530, in
the home of our president, Paul B. Gottbetter. We do not have any rental
agreement with Mr. Gottbetter.
Year 2000
We have assessed our state of readiness with respect to the problems,
regarding computer data processing, generally foreseen for many businesses upon
the advent of the Year 2000. The Year 2000 problem has arisen because most
existing computers use only the last two digits to refer to a year. Therefore,
these computer programs do not properly recognize a year that begins with "20"
instead of the familiar "19". If not corrected, many computer applications could
fail or produce erroneous results.
Because of our small size and the simplicity of our operations, we place
minimal reliance on computers. We have a comparatively small amount of
personnel, equipment, customers, work projects, vendors, and the like. We use
one brand new inexpensive computer, which is Year 2000 compliant in our one
office location. The computer is not networked with any other computer and only
communicates with our bank via the Internet. This computer is used for
maintaining simple financial books of accounts and statements and for non-date
sensitive word processing, record maintenance and report generation using word
processing. Billing, estimating, customer quotation, and planning are done
manually, in many cases by word processing. All of the work which we use our
computer for could be done manually.
The only supplier we have is Doncaster. We have not made an oral inquiry
of Doncaster as to their Year 2000 readiness. While we believe that, for the
most part, Doncaster will have addressed the Year 2000 issue, we cannot be
certain of this. However, for general business purposes we have always
maintained a personal relationship with the appropriate administrative and
operational personnel of Doncaster for the purpose of business procurement,
prompt payment of
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commissions, placing orders for goods and services, and receiving prompt
delivery of goods. In the event of the lack of readiness of Doncaster in the
Year 2000 to meet the problems under discussion, we intend to utilize our
personal relationships for the purposes of obtaining prompt payment of our
commission and prompt delivery of our orders. Because of the comparative
narrowness and simplicity of our operations and the nature of these operations
generally being non-dependent upon computers (as compared to computer,
financial, insurance, and record-intensive organizations), we do not anticipate
that the Year 2000 problem will have an adverse effect on our business and
administrative operations on a "gross basis".
We believe that the Year 2000 problem will not have a material effect on
our operations.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by the
selling shareholders but have agreed to bear all expenses for registration of
the shares under federal and state securities laws. See "Plan of Distribution."
All of the proceeds from the sale of the common stock will be paid to the
selling shareholders.
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999
and should be reviewed with our December 31, 1997 and 1998 audited financial
statements, and the notes to those financial statements, and our September 30,
1999 unaudited financial statements, included elsewhere in this prospectus.
September 30, 1999
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Cash and cash equivalents ............................ $ 17,117
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Current Liabilities .................................. 2,715
Shareholders equity:
Preferred Stock, $.001 par value, 5,000,000
shares authorized; none issued and
outstanding ...................................... --
Common Stock, $.001 par value, 200,000,000
shares authorized; 3,110,000 shares issued
and outstanding pro forma ........................ 3,110
Additional Paid-In Capital ........................... 19,330
Deficit accumulated during development
stage ............................................ (8,038)
Total shareholders' equity ....................... 14,402
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Total capitalization ........................ $ 17,117
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DIVIDEND POLICY
We have not paid any cash dividends to date, and we do expect to pay
dividends in the foreseeable future. We intend, in the short term at least, to
use all available funds to develop our business.
PLAN OF DISTRIBUTION
No Broker-Dealer or Selling Agent Now Planned
The selling shareholders may either sell their shares directly to a
purchaser or use of a broker-dealer to sell their shares. We will not sell
shares on any selling shareholder's behalf.
Determination of Offering Price
Before this offering there has been no market for the common stock, and we
have had limited business operations to date. The selling price will be
determined by the market.
We have not authorized anyone to give any information or to make any
representations concerning this offering other than those contained in this
prospectus. You should not rely on any representation made by any third parties.
This prospectus is not an offer to sell or a solicitation of an offer to buy any
of the securities it offers to any person in any jurisdiction where that offer
or solicitation is unlawful. The delivery of this prospectus or any sale of
securities does not imply that the information in this prospectus is correct as
of any date later than the date of this prospectus.
We will apply to register the securities in the states where the selling
shareholders reside, if we are requested to do so by the selling shareholders.
We may also try to get an exemption from registration to offer the securities in
various state jurisdictions. Purchasers of securities in this offering must be
residents of jurisdictions which either provides for an applicable exemption or
in which we register the securities. To prevent resale transactions in
violations of state securities laws, the certificates representing these
securities will contain information with respect to their resale. Harmony will
also advise its transfer agent and market makers, if any, of restrictions on
resale. These state restrictions on resales may limit the ability of investors
to resell the securities purchased in this offering. We presently intend to
register the securities or seek exemptions in Florida, New Jersey and New York.
Some exemptions are self-executing, that is, there are no notice or filing
requirements, and compliance with the conditions of the exemption makes the
exemption applicable.
The states may permit secondary market sales of the securities:
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o once we publish the necessary financial and other information
about ourselves in a recognized securities manual, such as
Standard & Poor's Corporation Records;
o after in the period required by that state has elapsed from
the date we issue the securities;
o under exemptions that may apply to some investors; or
o as a reporting company under the Securities Exchange Act of
1934.
PLAN OF OPERATION
The following discussion contains forward-looking statements involving
risks and uncertainties based on our current expectations and the development of
our business. All statements in this registration statement related to our
intended business plans, prospective financial operations and expected future
growth or profitability constitute forward-looking statements. Forward-looking
statements are subject to a number of risks and uncertainties. Our actual
results may differ significantly from those anticipated or expressed in these
statements. You should read the following discussion and analysis in conjunction
with the audited financial statements (and notes thereto) and other financial
information of Harmony appearing elsewhere in this registration statement for
the period from inception to September 30, 1999.
Harmony was formed on August 13, 1996, under the laws of the State of New
York. We intend to continue to be a direct seller of Doncaster apparel. The
following is our plan of operation for the next twelve months. Although Harmony
was formed in August 1996, we were unable to locate a business to engage in
until Summer 1998, when we discovered the business of direct selling Doncaster
apparel. From Summer 1998 to December 1998, we engaged in compiling a mailing
list to announce the December 1998 holiday line. We commenced operations as a
direct seller of Doncaster in December 1998. Our operations to date have
consisted of preparing for the direct selling of Doncaster by compiling a
mailing list, sending out mailings and the selling of Doncaster through trunk
shows and personal appointments.
We are in the developmental stage and our revenues are based solely on the
commission we receive from the sales of Doncaster apparel. We have also received
revenues from a limited offering of shares of our common stock in April 1999,
which raised $27,500. After deducting operating expenses which consist of
postage, printing and miscellaneous office supplies, the
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two consultants are paid their fees. Since we do not have to pay in advance for
any of the merchandise that we sell, it is not necessary to have large amounts
of cash available.
The proceeds from the limited offering have been and are being used to pay
for our legal and accounting fees in connection with the preparation and filing
our registration statement on Form 10-SB which was filed with the Securities and
Exchange Commission on July 21, 1999, the preparation and filing of this
prospectus, and the preparation and filing of our quarterly report for the
quarter ended September 30, 1999 on Form 10-QSB.
Doncaster expects to increase its current line of apparel by adding
women's sizes (16W, 18W, 20W, 1X, 2X, etc.), in the next twelve months. We
expect that with the additional sizes available, our customer base will increase
and our revenues will increase due to the additional sales. We expect that we
will have the necessary funds to pay for all our expenses from the gross
revenues we receive from selling Doncaster apparel. In addition, we intend to
look into other manufacturers for who we could act as a direct seller. Any
additional products that we would sell will compliment, but not compete with
Doncaster.
As of the date of this prospectus, we do not have any employees, but we do
have two independent contractors, who are paid on a percentage basis of what we
receive as commissions. We do not expect to hire any employees or engage the
services of any additional independent contractors in the next twelve months
unless the number of customers increases to such an extent that an additional
fashion consultant is needed. Any additional consultant would be paid a
percentage of our commissions.
As of September 30, 1999, we had current assets consisting of cash and
cash equivalents of $17,117 and current liabilities of $2,715. We reported net
losses of $8,038 for the period from inception to September 30, 1999, and we
anticipate that we will continue to operate at a loss for the foreseeable
future. Our expenses consist of general and administrative expenses, legal fees
and accounting fees. We expect that all of our legal and accounting fees
incurred in the next twelve months will be paid from the proceeds from April
1999 limited offering and from the revenue we receive.
The report of our independent accountants on our December 31, 1998
financial statements contains an explanatory paragraph regarding our ability to
continue as an on-going business.
13
<PAGE>
MANAGEMENT
The table below shows certain information about each of our officers and
directors.
Name Age Position
--------------------------------------------------------------------
Paul B. Gottbetter 67 President, Treasurer and Director
Michael C. Conte 40 Secretary and Director
The directors have been elected by the present shareholders and will serve
for a term of one year or until their successors are elected. Officers are
appointed by, and serve at the pleasure of, the Board of Directors.
The Directors and Executive Officers of Harmony are as follows:
Paul B. Gottbetter, President, Treasurer and Director, age 67, has been
the President, Treasurer and Director since our formation. Mr. Gottbetter serves
as President and Treasurer at the pleasure of the Board of Directors. Since
1959, Mr. Gottbetter has been self-employed as both a certified public
accountant and an attorney in private practice. Mr. Gottbetter's clientele
largely consists of various sectors of the major apparel industry ranging from
manufacturers to wholesalers. Mr. Gottbetter received his B.B.A. in accounting
in 1953 from City College of New York and his JD in 1955 from New York
University Law School.
Michael C. Conte, Secretary and Director, age 40, has been Secretary and a
Director since April 6, 1999. Mr. Conte serves as Secretary at the pleasure of
the Board of Directors. Mr. Conte has been employed by Paul B. Gottbetter as a
certified public accountant since June 1980. Mr. Conte received his B.S. in
accounting in 1980 from New York University.
Consultants
In addition to the officers and directors identified above, we expect that
Falene Gottbetter and Roberta Winley, both consultants, will be important to our
operations.
Falene R. Gottbetter, Independent Contractor, age 56, has been an
independent contractor for us , and has been selling the Doncaster Line since
December 1998. During the period between June 1994 and December 1998, Mrs.
Gottbetter was retired. Mrs. Gottbetter received her B.S. in education in 1964
from Finch College and her MA in education in 1982 from Long Island University.
Roberta Winley, Independent Contractor, age 56, has been an independent
contractor for us, and has been selling the Doncaster Line since December 1998.
Since January 1998, Ms. Winley has been the principle of RSW Image, Inc., a
fashion consultant. From 1994 to 1996,
14
<PAGE>
Ms. Winley was employed as a sales manager by Nancy Crystal, and from 1996 to
1998, Ms. Winley was employed as a sales manager for Nira Nira.
PRINCIPAL AND SELLING SHAREHOLDERS
The following tables show the numbers of shares and percentage of common
stock held by the officers and directors of Harmony and holders of five percent
(5%) or more of Harmony's common stock and by the selling shareholders Unless
otherwise indicated, the beneficial owners of the common stock listed below have
sole investment and voting power over these shares, subject to community
property laws where applicable.
Security Ownership of Certain Beneficial Owners.
The following information relates to those persons known to Harmony to be
the beneficial owner of more than five percent (5%) of the common stock, par
value $.001 per share, the only class of voting securities of Harmony
outstanding.
<TABLE>
<CAPTION>
Name and Amount and
Title of Address of Nature of Percentage
Class Beneficial Owner Beneficial Ownership of Class*
-------- ---------------- -------------------- -----------
<C> <S> <C> <C>
Common Stock, par Paul B. Gottbetter 1,735,000 shares 55.78%
value $.001 per share 8 Harmony Lane
Hartsdale, New York 10530 Direct
Common Stock, par Turbo International, Inc. 300,000 shares 9.64%
value $.001 per share 50 Shirley Street
Nassau, Bahamas Direct
Common Stock, par Turf Holdings Ltd. 300,000 shares 9.64%
value $.001 per share Oakbridge House
6 West Hill Street
P.O. Box N-8195
Nassau, Bahamas Direct
Common Stock, par Adam S. Gottbetter 277,333 shares(1) 8.91%
value $.001 per share 1035 Park Avenue, Apt. 5B
New York, New York 10028 Direct
Common Stock, par Otto Zimmerli 200,000 shares 6.43%
value $.001 per share Poststrasse 2
9050 Appenzell
Switzerland Direct
Common Stock, par U.K. Menon 200,000 shares 6.43%
value $.001 per share 28 Jalan 17/21 C
Selangor
Malaysia Direct
</TABLE>
- ----------
* Based on 3,110,000 shares issued and outstanding.
(1) 244,000 shares owed by Adam S. Gottbetter are included in this prospectus.
15
<PAGE>
Security Ownership of Management.
The number of shares of common stock of Harmony owned by the Directors and
Executive Officers of Harmony is as follows:
<TABLE>
<CAPTION>
Name and Amount and
Title of Address of Nature of Percentage
Class Beneficial Owner Beneficial Ownership of Class*
-------- ---------------- -------------------- -----------
<C> <S> <C> <C>
Common Stock, par Paul B. Gottbetter 1,735,000 shares 55.78%
value $.001 per share 8 Harmony Lane
Hartsdale, New York 10530 Direct
Common Stock, par Michael Conte 600 shares (1) (1)
value $.001 per share 18 Burdge Drive
Middletown, New Jersey 07748
All officers and directors 1,735,000 shares 55.78%
as a group (2 persons)
</TABLE>
- ----------
(1) Less than 1%.
* Based on 3,110,000 shares issued and outstanding.
Securities Ownership of Selling Shareholders
NAME OF
SELLING PERCENTAGE OF
SHAREHOLDER NO. OF SHARES COMMON STOCK
- --------------------------------------------------------------------------------
Best, Ula 600 *
Borofsky, Jeffrey M. 600 *
Bunton, Alfred 600 *
Coder, Kenneth 600 *
Cohen, Kenneth M. 600 *
Coker, Jr., Peter 600 *
Coker, Sr., Peter 600 *
Connaughton, Amanda 600 *
Conte, Michael C. 600 *
Davenport, Karen 600 *
Feifer, Fred 600 *
Gottbetter, Adam S. 277,333(1) 8.91%
Gottbetter, Daniel 600 *
Gottbetter, Franklyn 600 *
Hinojosa Jr., Milton 600 *
Howard, L. Meredith 600 *
Inemer, Steve 600 *
Inemer, Ira H. 600 *
Kass, Barbara 600 *
Lande, Ted 600 *
Levine, Pearl 600 *
Levner, Lawrence 600 *
Martin, LaFaye 600 *
Miller, Jules 600 *
Peate, Florence 600 *
Perry, Nicola 600 *
Rabuse, Nancy 600 *
16
<PAGE>
Redlich, Meyer 600 *
Rubenstein, Florence 600 *
Schweitzer, Arthur 600 *
Vaswani, Rani 600 *
Venturini, August C. 600 *
Winley, Roberta 600 *
Wojnar, Peter F. 600 *
Zephir, Barbara 600 *
Ziluck, Scott 600 *
- --------------------------------------------------------------------------------
(1) 244,000 shares owned by Adam Gottbetter are included in this prospectus.
We are registering all of the shares listed held by the selling
shareholders. The selling shareholders may sell their shares from time to time
in broker's transactions or otherwise. Because the selling shareholders may sell
all, some or none of the shares held, we cannot estimate the number of shares
that will be held by the selling shareholders. For purposes of the above table,
we have assumed that none of the shares offered by the Selling Shareholders will
be sold. (See "Plan of Distribution.")
We will not receive any of the proceeds from the sales of common stock by
the selling shareholders.
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue up to 200,000,000 shares of Common Stock, par
value $.001 per share. 3,110,000 shares of common stock are outstanding on the
date of this prospectus. Holders of common stock are entitled to one vote for
each share held of record on each matter submitted to a vote of shareholders.
There is no cumulative voting for election of directors.
Subject to the prior rights of any series of preferred stock which may
from time to time be outstanding, if any, holders of common stock are entitled
to receive ratably, dividends when, as, and if declared by the Board of
Directors out of funds legally available therefor, and upon the liquidation,
dissolution, or winding up of Harmony, to share ratably in all assets remaining
after payment of liabilities and payment of accrued dividends and liquidation
preferences on the preferred stock, if any. Holders of common stock have no
preemptive rights and have no rights to convert their Common Stock into any
other securities. The outstanding common stock is validly authorized and issued,
fully paid, and nonaccessible.
The outstanding common stock is validly authorized and issued, fully paid,
and nonaccessible. We intend to try to have the common stock traded on the
NASD's OTC Bulletin Board under the symbol "HRMY" and we have an application on
file with the NASD.
17
<PAGE>
Preferred Stock
We are authorized to issue up to 5,000,000 shares of "blank check"
preferred stock, par value $.001 per share, none of which are outstanding on the
date hereof. The Board of Directors has to date not established the rights and
preferences of the preferred stock.
Transfer and Warrant Agent
Continental Stock Transfer & Trust Company is the transfer for our common
stock.
EXPERTS
Thomas Monahan, independent certified public accountant, audited our
Financial Statements as of December 31, 1998 and for the period from August 13,
1996, when operations commenced, to December 31, 1998. In including those
financial statements in this prospectus, we have relied on Mr. Monahan's
authority as an expert in accounting and auditing.
LEGAL MATTERS
Kaplan Gottbetter & Levenson, LLP is counsel to Harmony and will pass on
the validity of the issuance of the shares to be sold by the selling
shareholders. The partners of Kaplan Gottbetter & Levenson, LLP, each own 33,333
shares of our common stock, and 244,000 shares of common stock owned by Adam S.
Gottbetter are included in this prospectus.
LEGAL PROCEEDINGS
Harmony and none of its officers or its directors is party to any pending
legal proceeding, nor is its property the subject of any pending legal
proceeding that is not routine litigation that is incidental to its business.
18
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Shares Eligible for Future Sale
Market Information
There is no public trading market on which Harmony's Common Stock is
traded. Harmony has engaged a broker/dealer to file a Form 211 with the National
Association of Securities Dealers ("NASD") in order to allow the quote of
Harmony's common stock on the Bulletin Board. Harmony's common stock may trade
on the Bulletin Board under the symbol "HRMY."
There are no outstanding options or warrants to purchase, or securities
convertible into, common equity of Harmony;
Of the 3,110,000 shares of common stock that are issued and outstanding
1,110,000 shares are eligible to be sold without registration under the
Securities Act. These shares were sold by Harmony in an offering under Rule 504
of Regulation D in April 1999. These shares are not subject to restrictions on
resale.
The shares registered this offering are issued and outstanding and will be
freely tradable without restriction or further registration under the Securities
Act, except for:
o any securities held by an "affiliate" of Harmony, which may be sold
only while this registration statement or another registration
statement covering sales by those affiliates is effective, or in
accordance with Rule 144; or
o securities purchased under circumstances which would make the
purchaser a statutory underwriter, such as where a single purchaser
acquires a large portion of the shares or warrants with the
intention to redistribute them or the underlying common stock.
An affiliate is a person controlling, controlled by or under common
control with Harmony. No shares are subject to any "lock-up" agreement or
similar arrangement.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year, including "affiliates" as that
term is defined under the Securities
19
<PAGE>
Act, is entitled to sell, within any three-month period, a number of shares that
does not exceed the greater of:
o one percent (1%) of the then outstanding shares of the common stock
or
o the average weekly trading volume in the common stock during the
four calendar weeks immediately preceding the date on which the
notice of sale is filed with the Commission.
A trading market may not develop or be sustained. The post-offering fair
value of Harmony's common stock, whether or not any secondary trading market
develops, is variable and may be affected by our business and financial
condition, as well as factors beyond our control. Sales of substantial amounts
of shares in any public market could cause lower market prices and even make it
difficult for Harmony to raise capital through a future offering of its equity
securities. In that connection, investors should note that we are registering
shares held by the selling shareholders.
Harmony is currently not planning on making a public offering of any
shares of its common stock.
Holders
There are approximately forty-four (44) record holders of common equity.
Dividends
As of the date hereof, no cash dividends have been declared on the common
stock. Subject to the prior rights of any series of preferred stock which may
from time to time be outstanding, if any, holders of common stock are entitled
to receive ratably, dividends when, as, and if declared by the Board of
Directors out of funds legally available therefor. Under the Business
Corporation Law of New York, Harmony may only pay dividends out of capital and
surplus, or out of certain enumerated retained earnings, as those terms are
defined in the Business Corporation Law of New York. The payment of dividends on
its common stock is, therefore, subject to the availability of capital and
surplus or retained earnings as provided in the Business Corporation Law of New
York.
20
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a Registration Statement on Form SB-2 with the Securities
and Exchange Commission covering the sale of the shares we are registering. The
Registration Statement and the exhibits and schedules to the Registration
Statement include additional information not contained in this prospectus.
Statements in this prospectus about the contents of any contract or other
document referred to are not necessarily complete and in each instance the
appropriate exhibit containing the contract or document should be consulted for
complete information. The Registration Statement, exhibits and schedules also
contain further information about us and the shares we are registering. Anyone
may inspect a copy of the Registration Statement without charge at the
Commission's principal office located at 450 Fifth Street, N.W., Washington,
D.C. 20549, the Northeast Regional Office located at 7 World Trade Center, 13th
Floor, New York, New York, 10048, and the Midwest Regional Office located at
Northwest Atrium Center, 500 Madison Street, Chicago, Illinois 60661-2511, and
copies of all or any part of the Registration Statement may be obtained from the
Public Reference Branch of the Commission by paying the fees prescribed by the
Commission. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains information about companies that file
electronically with the Commission.
21
<PAGE>
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(201) 790-8775
Fax (201) 790-8845
To The Board of Directors and Shareholders
of Harmony Trading Corp. (a development stage company)
I have audited the accompanying balance sheet of Harmony Trading Corp. (a
development stage company) as of December 31, 1998 and the related statements of
operations, cash flows and shareholders' equity for the years ended December 31,
1997 and 1998. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Harmony Trading Corp. (a
development stage company) as of December 31, 1998 and the results of its
operations, shareholders equity and cash flows for the year ended December 31,
1997 and 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Harmony Trading Corp. (a development stage company) will continue as a going
concern. As more fully described in Note 2, the Company has incurred operating
losses since the date of reorganization and requires additional capital to
continue operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans as to these
matters are described in Note 2. The financial statements do not include any
adjustments to reflect the possible effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the possible inability of Harmony Trading Corp. (a development
stage company) to continue as a going concern.
/s/ Thomas Monahan
----------------------
Thomas P. Monahan, CPA
June 10, 1999
Paterson, New Jersey
F-1
<PAGE>
HARMONY TRADING CORP.
(A development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
December September 30,
31, 1998 1999
-------- ----
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ -0- $17,117
Marketable securities 4,000
------ -------
Current assets $4,000 $17,117
Property and equipment -0- -0-
Total assets $4,000 $17,117
====== =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 723
Corporate taxes payable $ 325 259
Officer loans payable 2,325 1,733
------ -------
Total current liabilities $2,650 $ 2,715
Stockholders' equity
Preferred stock authorized 5,000,000 shares, $0.001 par value each. At
December 31, 1998 and September 30, 1999 there are -0- and -0- shares
outstanding respectively.
Common Stock authorized 20,000,000 shares, $0.001 par value each.
At December 31, 1998 and September 30, 1999, there are 1,000,000 and
3,110,000 shares outstanding respectively. 1,000 3,110
Additional paid in capital 19,330
Deficit accumulated during development stage 350 (8,038)
------ -------
Total stockholders' equity 1,350 14,402
------ -------
Total liabilities and stockholders' equity $4,000 $17,117
====== =======
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
HARMONY TRADING CORP.
(A development stage company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the period
For the Nine For the Nine from inception,
months ended months ended August 13, 1996,
For the year ended For the year ended September 30, September 30, to September 30,
December 31, December 31, 1998 1999 1999
1997 1998 Unaudited Unaudited Unaudited
---- ---- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue $4,000 $ -0- $ -0- $14,825 $18,825
Costs of goods sold -0- -0- -0- -0- -0-
--- --- --- --- ---
Gross profit $4,000 $ -0- $ -0- $14,825 $18,825
Operations:
General and administrative 1,865 1,785 1,250 23,485 27,135
----- ----- ----- ------ ------
Total expense 1,865 1,785 1,250 23,485 27,135
Income from operations 1,865 (1,785) (1,250) (8,660) (8,310)
Other income
Interest income 272 272
Income (loss) $2,135 $(1,785) $1,250 $(8,388) $(8,038)
====== ======== ====== ======= =======
Net income (loss) per share -
basic (0.00) (0.00) (0.00)
Number of shares outstanding-
basic 1,000,000 1,000,000 1,000,000 3,110,000 3,110,000
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
HARMONY TRADING CORP.
(A development stage company)
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Additional Deficit accumulated
Common Common paid in during development
Date Stock Stock Capital stage Total
---- ----- ----- ---------- ------------------- -----
<S> <C> <C> <C> <C> <C>
December 31, 1996
balance (1) 1,000,000 $1,000 $1,000
Net income $ 2,135 $ 2,135
--------- ------ ------- -------- -------
December 31, 1997
balance 1,000,000 1,000 2,135 3,135
Net loss (1,795) (1,795)
--------- ------ ------- -------- -------
December 31, 1998
balance 1,000,000 1,000 350 1,350
Unaudited Sale of shares 505,000 505 24,745 25,250
Contribution of services 375 375
Issuance of shares for legal 50,000 50 2,450 2,500
services
Less offering expenses (6,685) (6,685)
Net Loss (8,388) (8,388)
--------- ------ ------- -------- -------
September 30, 1999
balance 1,555,000 $1,555 $20,885 $ (8,038) $14,402
========= ====== ======= ======== =======
September 30, 1999 Adjusted
balances for 2 for 1 forward
split 3,110,000 $3,110 $19,330 $ (8,038) $14,402
========= ====== ======= ======== =======
</TABLE>
(1) On August 14, 1996, the Company sold 200 shares in consideration for $1,000
in marketable securities. On April 2, 1999, the Company forward split the number
of shares outstanding in a ratio of 5,000 to 1. The number of shares outstanding
has been restated from inception.
See accompanying notes to financial statements
F-4
<PAGE>
HARMONY TRADING CORP.
(A development stage company)
STATEMENT OF CASH FLOWS
For the period from inception, August 13, 1996 to September 30, 1999
<TABLE>
<CAPTION>
For the period
For the Nine For the Nine from inception,
For the year For the year months ended months ended August 13, 1996
ended ended September 30, September 30, to September 30,
December 31, December 31, 1998 1999 1999
1997 1998 Unaudited Unaudited Unaudited
------------ ------------ ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $-0- $(1,785) $(500) $(8,388) $(8,038)
Non cash transaction 1,000 2,875 3,875
Corporate taxes 325 (66) 259
--- --- ---
Accounts payable and accrued 723 723
expenses
TOTAL CASH FLOWS FROM 1,000 (1,460) (500) (4,856) (3,181)
OPERATIONS
CASH FLOWS FROM INVESTING
ACTIVITIES
Marketable securities (1,000) 4,000
------ -----
TOTAL CASH FLOWS FROM (1,000) 4,000
INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING
ACTIVITIES
Officer loan payable 2,000 500 (592) 1,733
----- --- ---- -----
Sale of stock net of offering expenses 18,565 18,565
TOTAL CASH FLOWS FROM 2,000 500 17,973 20,298
FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN CASH 1,460 (1,460) -0- 17,117 17,117
CASH BALANCE BEGINNING OF PERIOD -0- 1,460 -0- -0- -0-
--- ----- --- --- ---
CASH BALANCE END OF PERIOD $1,460 $-0- $-0- $17,117 $17,117
====== ==== ==== ======= =======
Non cash activities $ 2,500 $ 2,500
Issuance of 100,000 shares of
Post split Common Stock in
Consideration for legal services 375 375
------- -------
Contribution of promotion services
Total non cash items $ 2,875 $ 2,875
======= =======
</TABLE>
F-5
<PAGE>
HARMONY TRADING CORP.
(A development stage company)
Note 1. Organization of Company and Issuance of Common Stock
a. Creation of the Company
Harmony Trading Corp., (the "Company") was formed under the laws of New
York on August 13, 1996 and was originally authorized to issue 200 shares of
common stock, without par value each. On April 6, 1999, the Company amended its
certificate of incorporation increasing the authorized number of shares of
common stock to 20,000,000, $0.001 par value each and increasing the authorized
number of shares of preferred stock to 5,000,000, $0.001 par value each.
On September 16,1999, the Company forward split the number of shares of
common stock outstanding in a ratio of 2 to 1 restating the number of shares
outstanding from 1,555,000 to 3,110,000.
On September 20, 1999, the Company amended its certificate of
incorporation to authorize an aggregate of 200,000,000 shares of common stock,
$.001 par value each and 5,000,000 shares of preferred stock, $.001 par value
each.
b. Description of the Company
The Company is considered to be a development stage business that is in
the business of the direct selling of women's apparel and accessories through
personal appointments and fashion shows.
c. Issuance of Shares of Common Stock
On January 5, 1998, the Company sold an aggregate of 200 shares of common
stock for $1,000 in marketable securities or $5.00 per share.
In January, 1998, Paul Gottbetter, President of the Company, gifted 25
pre-split shares of common stock to Adam S. Gottbetter, which were restated to
125,000 shares after the forward split.
On April 2, 1999, the number of shares of common stock was forward split
in a ratio of 5,000 to 1 restating the number of shares of common stock
outstanding from 200 to 1,000,000.
Subsequent to the date of the balance sheet, the Company has sold,
pursuant to the terms of Rule 504 of Regulation D of the Securities Act of 1933,
as amended, an aggregate of
F-6
<PAGE>
555,000 shares of common stock at $0.05 per share for an aggregate of $27,750
less $6,685 in offering expenses.
Note 2-Summary of Significant Accounting Policies
a. Basis of Financial Statement Presentation
The accompanying unaudited financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
incurred net losses of $8,388 for the period from inception, August 13, 1996, to
September 30, 1999. These factors indicate that the Company's continuation as a
going concern is dependent upon its ability to have positive cash flows from
operations. The Company's future capital requirements will depend on numerous
factors including, but not limited to, continued progress in its selling
capabilities and implementing its marketing strategies. The Company plans to
engage in such ongoing financing efforts on a continuing basis.
The financial statements presented consist of the balance sheet of the
Company as at December 31, 1998 and the related statements of operations and
cash flows for the year ending December 31, 1998.
The unaudited financial statements presented consist of the balance sheet
of the Company as at September 30, 1999 and the related statements of operations
and cash flows for the nine months ended September 30, 1998 and 1999 and for the
period from inception, August 13, 1996, to September 30, 1999.
b. Cash and cash equivalents
The Company treats temporary investments with a maturity of less than
three months as cash.
c. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
d. Selling and Marketing Costs
Selling and Marketing - Certain selling and marketing costs are expensed
in the period in which the cost pertains. Other selling and marketing costs are
expensed as incurred.
e. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported
F-7
<PAGE>
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
f. Significant Concentration of Credit Risk
At December 31, 1998, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
g. Asset Impairment
The Company adopted the provisions of SFAS No. 121, Accounting for the
impairment of long lived assets and for long-lived assets to be disposed of
effective January 1, 1996. SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the estimated undiscounted cash flows to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. There
was no effect of such adoption on the Company's financial position or results of
operations.
h. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives using the straight line
methods over a period of seven years. Maintenance and repairs are charged
against operations and betterments are capitalized.
i. Significant Concentration of Credit Risk
At September 30, 1999, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
j. Recent Accounting Standards
Accounting for Derivative Instruments and Hedging Activities
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133) was issued in June
1998. It is effective for all fiscal years beginning after June 15, 1999. The
new standard requires companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivatives and whether they qualify for hedge accounting. The
key criterion for
F-8
<PAGE>
hedge accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. The Company does not
currently engage in derivative trading or hedging activity. The Company will
adopt SFAS 133 in the fiscal year ending December 31, 2000, although no impact
on operating results or financial position is expected.
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use
In March of 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". SOP 98-1 requires computer
software costs associated with internal use software to be charged to operations
as incurred until certain capitalization criteria are met. SOP 98-1 is effective
beginning January 1, 1999. The Company is currently assessing the impact that
adoption of this statement will have on consolidated financial position and
results of operations.
k. Unaudited financial information
In the opinion of Management, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position of the Company as of
September 30, 1999 and the results of its operations and its cash flows for the
nine months ended September 30, 1999. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the SEC's rules and regulations of the Securities and Exchange
Commission. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year.
Note 3 - Related Party transactions
a. Issuance of Shares of Common Stock
On January 5, 1998, the Company sold an aggregate of 200 shares of common
stock for $1,000 in marketable securities or $5.00 per share.
In January, 1998, Paul Gottbetter, President of the Company, gifted 25
pre-split shares of common stock to Adam S. Gottbetter, which were restated to
125,000 shares after the forward split.
Paul Gottbetter and Adam S. Gottbetter are father and son.
F-9
<PAGE>
b. Office Location
The Company occupies office space rent free on a month to month basis at
the home of its President, Paul B. Gottbetter, Certified Public Accountant, 8
Harmony Lane, Hartsdale, New York 10530.
c. Officer Loan
As of December 31, 1998 and September 30, 1999, the Company is obligated
to repay officer loans to Paul Gottbetter, President of the Company aggregating
$2,325 and $1,733 respectively.
Note 4 - Marketable Securities, Available for Sale
The Company adopted Financial Accounting Standards Board ("FASB")
Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", which requires that investments in equity securities that have
readily determinable fair values and investments in debt securities be
classified in three categories: held-to-maturity, trading and
available-for-sale. Based on the nature of the assets held by the Company and
Management's investment strategy, the Company's investments have been classified
as available-for-sale. Management determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date.
Securities classified as available-for-sale are carried at estimated fair
value, as determined by quoted market prices, with unrealized gains and losses,
net of tax, reported in a separate component of stockholders' equity. At
December 31, 1998, the Company had no investments that were classified as
trading or held-to-maturity as defined by the Statement.
The following is a summary of cash, cash equivalents and
available-for-sale securities by balance sheet classification at December 31,
1998:
Estimated
Gross Gross Fair
Unrealized Unrealized Market
Cost Gains Losses Value
---- ---------- ---------- ---------
Cash $ -0- $ -0- $ -0- $ -0-
----- ----- ----- -----
Total cash and cash
equivalents $ -0- $ -0- $ -0- $ -0-
Marketable securities
available for sale $4,000 $4,000
------ ------
Total $4,000 $4,000
====== ======
F-10
<PAGE>
Note 5 - Commitments and Contingencies
At December 31, 1998 and September 30, 1999, the Company has not entered
into any contracts or commitments.
Note 6 - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1998 and September 30,
1999, the Company had no material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position because the deferred
tax asset related to the Company's net operating loss carryforward and was fully
offset by a valuation allowance.
At September 30, 1999, the Company has net operating loss carry forwards
for income tax purposes of $8,038. This carryforward is available to offset
future taxable income, if any, and expires in the year 2010. The Company's
utilization of this carryforward against future taxable income may become
subject to an annual limitation due to a cumulative change in ownership of the
Company of more than 50 percent.
The components of the net deferred tax asset as of September 30, 1998 are
as follows:
Deferred tax asset:
Net operating loss carry forward $ 2,852
Valuation allowance $(2,852)
-------
Net deferred tax asset $ -0-
=======
The Company recognized no income tax benefit for the loss generated in the
period from inception, August 13, 1996, to September 30, 1999.
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income.
Because the Company has yet to recognize significant revenue from the sale
of its products, the Company believes that a full valuation allowance should be
provided.
F-11
<PAGE>
Note 7 - Preferred Stock
The Company's authorized capital stock consists of 5,000,000 Shares of
Preferred Stock, par value $.001 per share.
The Board of Directors of the Company has the authority to establish and
designate any shares of stock in series or classes and to fix any variations in
the designations, relative rights, preferences and limitations between series as
it deems appropriate, by a majority vote.
The preferred stock may be issued in series, each of which may vary, as
determined by the board of directors, as to the designation and number of shares
in such series, voting power of the holders thereof, dividend rate, redemption
terms and prices, voluntary and involuntary liquidation preferences, and
conversion rights and sinking fund requirements, if any, of such series.
As of December 31, 1998 and September 30, 1999, the number of shares of
preferred stock outstanding is -0-.
Note 8 - Business and Credit Concentrations
The amount reported in the financial statements for cash approximates fair
market value. Because the difference between cost and the lower of cost or
market is immaterial, no adjustment has been recognized and investments are
recorded at cost.
Financial instruments that potentially subject the company to credit risk
consist principally of trade receivables. Collateral is generally not required.
F-12
<PAGE>
================================================================================
We have not authorized any dealer, salesman or other person to give any
information or to make any representation not contained in this prospectus in
connection with the offer made by this prospectus. If anyone makes or gives such
information or representation you should not rely on it as authorized by us.
This prospectus does not constitute an offer of any securities other than the
securities to which it relates or an offer to any person in any jurisdiction in
which such an offer would be unlawful. The delivery of this prospectus or any
sale made under this prospectus under no circumstances implies that the
information in the prospectus is correct as of any time after the prospectus's
date.
--------------
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY.............................................................2
RISK FACTORS...................................................................3
BUSINESS OF HARMONY............................................................7
USE OF PROCEEDS...............................................................10
CAPITALIZATION................................................................10
DIVIDEND POLICY...............................................................11
PLAN OF DISTRIBUTION..........................................................11
PLAN OF OPERATIONS............................................................12
MANAGEMENT....................................................................14
PRINCIPAL AND SELLING SHAREHOLDERS............................................15
DESCRIPTION OF SECURITIES.....................................................17
EXPERTS .....................................................................18
LEGAL MATTERS.................................................................18
MARKET FOR COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.................................................19
WHERE YOU CAN FIND ADDITIONAL
INFORMATION..................................................................20
FINANCIAL STATEMENTS.........................................................F-1
--------------
Until , 2000 (90 days from the date of this prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
================================================================================
================================================================================
HARMONY TRADING CORP.
265,000 Shares Common Stock
---------------------------
P R O S P E C T U S
---------------------------
, 1999
================================================================================
28
<PAGE>
PART II.
ITEM 24. Indemnification of Directors and Officers.
Harmony's Certificate of Incorporation contains provisions to (i)
eliminate the personal liability of its directors for monetary damages resulting
from breaches of their fiduciary duty (other than breaches of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, violations under Section 719 of the
Business Corporation Law of New York or for any transaction from which the
director derived an improper personal benefit) and (ii) indemnify its directors
and officers to the fullest extent permitted by Section 721 of the Business
Corporation Law of New York, including circumstances in which indemnification is
otherwise discretionary. Harmony believes that these provisions are necessary to
attract and retain qualified persons as directors and officers. The SEC has
taken the position that the provision will have no effect on claims arising
under the federal securities laws.
ITEM 25. Other Expenses of Issuance and Distribution
SEC Registration Fee $ 4.00
------
Blue Sky Fees and Expenses $ 0.00
----
Legal Fees and Expenses $ 2,000.00
--------
Printing and Engraving Expenses $ 1,000.00
--------
Accountants' Fees and Expenses $ 0.00
----
Miscellaneous $ 500.00
------
The above expenses, except for the SEC fees, are estimated.
ITEM 26. Recent Sales of Unregistered Securities.
In August 1996, Harmony issued 200 shares of its common stock to Paul
Gottbetter for a price of $5.00 per share. The shares of Common Stock were
issued pursuant to Section 4(2) of the Securities Act.
On April 6, 1999, Harmony closed its offering of Common Stock pursuant to
Rule 504 of Regulation D promulgated under the Act. Harmony sold 555,0000 shares
of its Common Stock, at a price of $.05 per share, aggregating $27,750.
29
<PAGE>
ITEM 27. Exhibits.
Exhibit No. Description
- ----------- -----------
3.1* Certificate of Incorporation
3.2(a)* Certificate of Amendment of the Certificate of Incorporation
filed April 7, 1999
3.2(b)** Certificate of Amendment of the Certificate of Incorporation
filed September 20,1999
3.3* By-laws of Harmony
5 Opinion of Kaplan Gottbetter & Levenson, LLP
23.1 Consent of Kaplan Gottbetter & Levenson, LLP, counsel to
Harmony (contained in opinion filed as Exhibit 5)
23.2 Consent of Thomas Monahan, independent public accountant
27** Financial data schedule.
- ----------
* Incorporated by Reference to the registration statement on Form 10-SB
filed July 21, 1999.
** Incorporated by Reference to Form 10-QSB for the period ended September
30, 1999 filed on November 15, 1999.
ITEM 28. Undertakings
Harmony hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement; and
30
<PAGE>
(iii) Include any additional or change material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
31
<PAGE>
SIGNATURES
In accordance with the Securities Act of 1933, the registrant certifies
that is has reasonable grounds to believe that it meets all of the requirements
for filing on Form SB-2 and authorized this registration statement to be signed
on its behalf by the undersigned, in the city of New York, state of New York, on
December 21, 1999.
HARMONY TRADING CORP.
(Registrant)
By /s/ Paul B. Gottbetter
----------------------------------------
Paul B. Gottbetter, Chief Executive
Officer
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement was signed by the following persons in the
capacities and on the dates stated.
/s/Paul B. Gottbetter President, Treasurer, Director December 21, 1999
- ------- -- ---------- ---------- ---------- -------- -------- --- ----
(Signature) (Title) (Date)
/s/Michael C. Conte Secretary and Director December 21, 1999
- ---------- -- ----- --------- --- -------- -------- --- ----
(Signature) (Title) (Date)
32
EXHIBIT 5
OPINION AND CONSENT OF COUNSEL
<PAGE>
KAPLAN GOTTBETTER & LEVENSON, LLP
ATTORNEY AT LAW
NEW JERSEY
630 THIRD AVENUE OFFICE
NEW YORK, NEW YORK 10017-6705 ----------
TEL: (212) 983-6900 2237 LEMOINE AVENUE
FAX: (212) 983-9210 FORT LEE, NJ 07024
E-MAIL: [email protected] TEL: (201) 947-4005
FAX: (201) 947-5812
December 21, 1999
Harmony Trading Corp.
8 Harmony Lane
Hartsdale, NY 10530
Gentlemen:
At your request, we have participated in the preparation of the
Registration Statement on Form SB-2 of Harmony Trading Corp., a New York
corporation (the "Company"), to be filed with the Securities and Exchange
Commission (the "Registration Statement"), relating to the registration under
the Securities Act of 1933, as amended, of 265,000 shares of the Company's
common stock, $.001 par value per share (the "Common Stock"), which is held by
certain holders (the "Registered Stock"). The Registered Stock may be sold to
the public by the selling shareholders named in the Registration Statement.
As counsel to the Company, we have examined the proceedings taken by the
Company in connection with the issuance of the Registered Stock.
We are of the opinion that the shares of Registered Stock issued, sold and
delivered by the Company have been duly authorized and have been legally issued,
are fully paid and are non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the prospectus constituting a part thereof and any supplements and
amendments thereto.
Very truly yours,
KAPLAN GOTTBETTER & LEVENSON, LLP
/s/ Kaplan Gottbetter & Levenson, LLP
EXHIBIT 23.2
<PAGE>
CONSENT OF INDEPENDENT AUDITOR
I consent to the reference to me under the caption "Experts" and to the use of
my report, dated June 10, 1999, of the Financial Statements of Harmony Trading
Corp. for the years ended December 31, 1997 and 1998, in the Registration
Statement on Form SB-2 and related prospectus of Harmony Trading Corp. for the
registration of 265,000 shares of its common stock.
/s/ Thomas P. Monahan
THOMAS P. MONAHAN
December 16, 1999
Paterson, New Jersey
