As filed with the Securities and Exchange Commission on February 11, 2000
Registration No. 333-93279
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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Amendment No. 1 to
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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<S> <C> <C>
New York 5621 13-3935933
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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
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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>
Common Stock, par value, $.001 per share ............ 265,000 $.05 $63,250 $16.70
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TOTAL ................................................................................. $63,250 $16.70
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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 amends this registration statement on the 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, or until the Registration Statement shall become effective on the date as
the Commission, acting under Section 8(a), may determine.
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The information contained in this prospectus is not complete and may be amended.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted before the registration statement becomes effective.
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.
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PROSPECTUS
(subject to completion)
Harmony Trading Corp.
1,265,000 Shares Common Stock
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This prospectus relates to the sale of up to approximately 1,265,000
shares of our common stock offered for the account of the selling shareholders.
The price of these shares are undetermined at this time. Any proceeds and
profits from their sale will go to the selling shareholders and not to us.
We have applied to have our common stock quoted on the Nasdaq OTC Bulletin
Board under the symbol "HRMY". No public market currently exists for the shares
of common stock.
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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 of 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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February ___, 2000
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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 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 under New York state law 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 1,265,000 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. The price of the shares is undetermined at this time.
Use of Proceeds
We will not receive any proceeds from the sale of the securities by the
selling shareholders.
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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
We do not expect to earn profits from our operations as they are presently
conducted. Our 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. Our business is conducted on a part-time basis and for one of the
women, the income derived from our business is part of her income to meet
regular personal expenses. One of the two people providing services to us has
other sources of income or support. To the extent we derive commissions from our
sales activities, those commissions are expected to be paid in substantial part
or all in the form of commissions to the two women making the sales.
A majority of our sales are made to personal contacts of our independent
consultants. Although we are making efforts to expand our customer base, the
majority of our sales are to the family, friends and acquaintances of our two
independent contractors. If one of these independent contractors ends her
relationship with us, we could lose the income received from her contacts and
have a decrease in revenue.
Our relationship with Doncaster is through our two independent
contractors. Harmony was introduced to Doncaster by our independent contractors.
It is the independent contractors that have direct contact with Doncaster, our
sole supply source for merchandise. The loss of the services of either of the
independent contractors, or a deterioration in their relationships with
Doncaster could reduce or eliminate our ability to get the necessary
merchandise.
We are a new business and have a limited operating history. Harmony has
had very limited operations. We are at an early stage of development in our
business strategy and are subject to all the risks of a new business enterprise.
Our management has limited experience in managing an apparel business. Our
president and our directors have legal and accounting clients in the clothing
industry, but they have never operated an apparel business. Because of its
limited experience, our management may not be able to successfully develop and
implement strategies and manage our business to achieve or maintain
profitability.
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.
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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 our business.
The merchandise we sell is made by one supplier. We only sell products
made by Doncaster. We have no guaranteed supply arrangements with Doncaster and
orders are filled on a "first-come, first-serve" basis. 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.
Our business is dependent on a limited number of key personnel. We are
dependent for our success on the talent, expertise and experience of our
president and our 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.
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.
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"). On
January 1, 2000, a critical date in regards to all year 2000 compliance systems,
we did not experience any problems with our internal systems. However, there can
be no assurance that we will not experience any year 2000 problems in the
foreseeable future.
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 sufficiently distributed, but we cannot give any assurance that we will
achieve sufficient distribution for the market maker. We expect that initially
any market will be on the Nasdaq OTC Bulletin Board. Consequently, the
securities may be an illiquid long-term investment.
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The "penny stock" rules could make selling shares more difficult for the
selling shareholders. Our common stock will be a "penny stock," under Rule
3a51-1 under the Securities Exchange Act of 1934 unless and until the shares
reach a price of at least $5.00 per share, we meet the financial size and volume
levels for our common stock not to be considered a penny stock, or 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
R rules 15g-l through 15g-10 of the Securities exchange Act that require
securities broker-dealers, before carrying out transactions in any "penny stock"
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 to disclose price information about the stock to disclose the
compensation received by the broker-dealer or any associated person of the
broker-dealer; and 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 approve the
"penny stock" purchaser's account under standards specified in the rule, and
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 our common stock and
also limit the ability of any subsequent shareholders to sell the shares in the
secondary market.
We have had losses since our inception. We have had losses of $35,788
since our formation. We can give no assurance that we will not continue to have
losses in the future.
Accountant's opinion on our business continuing as a ongoing concern. Our
ability to continue operations will depend on our positive cash flow, if any,
from future operations and on our ability to raise funds through equity or debt
financing. We do not know if we will be able to raise additional funding or if
such funding will be available on favorable terms. It may be necessary for us to
reduce our operations or stop operations if we are unable to raise or obtain
needed funding. Increased spending resulted in a net loss of $10,785 for the
fiscal year ended December 31, 1998, and a loss of $15,410 for the nine months
ended September 30, 1999. We may incur additional losses if our expenses exceed
out revenue from operation. The "Going Concern" Qualification of the Report of
Our Independent Accountant May Hurt Our Ability to Raise Additional Funding. The
report of our independent accountants on our December 31, 1998 financial
statements contains an explanatory paragraph regarding our ability to continue
as an ongoing business. Our independent accountants cited our continuing to
incur net losses, that raised substantial doubt as to our ability to continue as
an ongoing business.
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,
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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.
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 Limited Partnership, a
private company, 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 our two independent contractors, Falene
Gottbetter and Roberta Winley, market the Doncaster line through fashion shows
and private appointments. Initially, Mrs. Gottbetter entered into a fashion
consultant agreement with Tanner. Tanner and Mrs. Gottbetter verbally agreed to
allow us to assume the fashion consultant agreement from Mrs. Gottbetter.
Under the agreement with Tanner, we receive a sales kit four times a year,
one for each seasonal collection. We pay $180 to Doncaster for each sales kit,
but that money will be refunded if we decide not to continue selling Doncaster.
The sales kit includes brochures for the trunk show mailings, a look book which
contains a detailed description of every item, fabric and color swatches,
pictures of every item in the collection, a size chart and a pricing sheet. The
agreement is on-going and can be terminated either by us or by Tanner on thirty
(30) days written notice. The agreement provides that we will not show
competitive products at the same time that we are showing Doncaster apparel. We
must sell, after returns and credits, a minimum of $10,000 per collection in
order to remain a fashion consultant for Doncaster.
We are in the District 39 selling district. Although we are geographically
based in Westchester County, New York, we are not limited to selling to
customers only located in Westchester, and we sell to anyone wherever located.
We are not the only Doncaster fashion consultant in District 39. District 39
consists of the counties of Orange, Rockland, Nassau, Westchester and New York.
There are approximately 28 other fashion consultants in District 39. The
district managers set sales goals for the fashion consultants based on the
previous collection's sales. These goals are only guidelines, and the fashion
consultants are not penalized if the goals are not met.
Each Doncaster sales district has a district manager. The district manager
is responsible for coordinating the scheduling of all the trunk shows in the
district, the receipt of the trunk show clothing collection and keeping the
fashion consultants in communication so the truck show collection is delivered
to every fashion consultant on time. The district manager works with the
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fashion consultants when they are having problems with Doncaster in having
orders delivered, having returns credited and having back orders filled.
Doncaster also has regional managers. The regions consist of several
states. The regional managers have similar responsibilities to the district
manager but on a larger scale.
Doncaster has district training services once a month for all fashion
consultants in each sales district. The seminars are held at Doncaster's
showroom in New York, New York. The cost of attending these seminars is $50 per
person, which is for the cost of the luncheon and refreshments. At the district
training seminars, Doncaster fashion consultants meet with the district sales
manager to discuss customer complaints, selling techniques and Doncaster
merchandise. The seminars last for half a day and attendance is strongly
recommended, though not mandatory.
Doncaster also holds regional meetings for its fashion consultants four
times per year, which include districts from several states. These regional
meetings are all day affairs, at a cost of approximately $85 per person, which
is for the cost of the luncheon and refreshments. At the regional meetings,
Doncaster presents a fashion show of its new collection, has a question and
answer session for its fashion consultants, and presents awards to its top
sellers. Both Mrs. Gottbetter and Ms. Winley have received awards for their
selling efforts. Doncaster holds one annual meeting for its fashion consultants.
There are four trunk shows every year, one for each collection. We have
our trunk shows in the home of Paul and Falene Gottbetter. Each trunk show lasts
for one week. For the second to fourth week prior to a trunk show, Mrs.
Gottbetter devotes approximately 16 hours per week preparing for the show. Ms.
Winley devotes approximately 50 hours per week for the same period. During this
three-week period, Mrs. Gottbetter and Ms. Winley create a mailing on the show
and send the mailing to the customers on our client list. They also begin making
appointments to show clients the collection during the show.
The week prior to the show Mrs. Gottbetter devotes approximately 24 hours
to our business and Ms. Winley devotes approximately 4 hours. During this time,
they prepare the Gottbetter's home for the show and schedule appointments.
During the week of the trunk show and the week after the trunk show, both Mrs.
Gottbetter and Ms. Winley devote approximately 40 hours each per week to our
business, showing clients the collection and taking orders. The week after the
trunk show is spent following up with Doncaster on the orders. During the rest
of the year, Mrs. Gottbetter spends approximately 10 hours a week on our
business and Ms. Winley spends about 25 hours a week.
In management's opinion, and Mrs. Gottbetter's and Ms. Winley's opinions,
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 women's sizes 14 to 24 and is a fuller cut to assure
true
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sizing and proper fit. Doncaster added a new line of women's sizes to its Spring
collection called Elana.
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 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, 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 including, but not limited to, a shirtwaist
dress, and a man 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 included 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 trunk
shows and preview shows during the year.
The trunk show lasts for one week and it is by appointment. Customers make
appointments to view the current collection, try on different pieces and place
orders. Each client's appointment is for one hour to one and one-half 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 like as Harper's Bazaar, Town &
Country Mode, and Vogue. Doncaster
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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 organizations, including but not limited
to, 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 manager.
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.
In addition to selling Doncaster, our consultants also act as fashion
consultants. As a fashion consultant we:
o teach people how to put different outfits together using the
same items of clothing;
o act as a wardrobe consultant and assist clients in throwing
away the old clothes that they have been saving; and
o assist the clients in evaluating which styles and color are
the most suitable for them.
We act as a fashion consultant directly in connection with our selling
Doncaster. We do not currently charge for this service because we have found
that our clients, after consulting with us, tend to purchase more items in order
to update or create a new look.
We are contemplating becoming a direct seller for additional products that
do not compete with Doncaster. We are investigating the possibility of being a
direct seller of cosmetics and skin care products. We are currently
investigating the various cosmetic and skin care manufacturers that engage in
direct sales, although we have no arrangements with any manufacturer and we have
not identified a specific manufacturer who we may contact.
In investigating the different manufacturers, we are interested in product
that are:
o of high quality;
o moderate cost;
o has supportive management;
o has national advertising; and
o has a reasonable return policy.
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As of February 1, 2000, 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. Mrs. Gottbetter and Ms. Winley are
independent contractors and not our employees. The decision to have them as
independent contractors is for tax purposes. By classifying Mrs. Gottbetter and
Ms. Winley as independent contractors and not employees, we are not responsible
for paying unemployment taxes, disability or social security taxes, providing
benefits like pension or medical plans, providing paid vacation or withholding
taxes. The benefit to us is that our record keeping is simpler. We pay our
consultants a commission and give them a Form 1099 for their yearly taxes.
Our consultants are considered independent consultants because they do not
have an employment contract with us, they have no regular hours and they are
paid on a commission basis.
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. We pay a nominal rent of $250 per month to 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 has 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
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and operational personnel of Doncaster for the purpose of business procurement,
prompt payment of commissions, placing orders for goods and services, and
receiving prompt delivery of goods.
On January 1, 2000, a critical date in regards to all Year 2000 compliance
systems, we did not experience any problems with our internal systems. However,
there can be no assurance that we will not experience any Year 2000 problems in
the foreseeable future.
In the event that Doncaster does experience Year 2000 problems, 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 there will be any Year 2000 problem which 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.
Management's Discussion and Analysis / 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
money 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 of
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approximately $1,000 per trunk show, the 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.
Doncaster pays us 25% of our net sales. Our net sales are the total of all
our sales minus any returns. Of the money we receive from Doncaster. Ms. Winley
is paid 40%. We divide the remaining money equally between Harmony and Mrs.
Gottbetter.
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 increased its current line of apparel by adding women's sizes
(16W, 18W, 20W, 1X, 2X, etc.), in the Spring 2000 collection. We expect that
with the additional sizes available, our customer base will increase and our
revenues will increase due to the additional sales. We realize adequate revenue
after the payment of the commissions to our independent contractors, to cover
our out-of-pocket costs, and our legal and accounting expenses. In the next
twelve months we intend to:
o continue selling Doncaster apparel;
o increase our client base through mailings and word-of-mouth;
o become a direct seller of a cosmetic skin care product line or
another product line that compliments but does not compete
with Doncaster.
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 an extent that an additional fashion consultant is
needed. Any additional consultants would be paid a percentage of our
commissions.
Although we would like to generate profits, at this stage, it is unlikely
we will be able to do so, unless our net sales increase. In order to do this,
our sales at Doncaster must increase or we must sell other products in addition
to Doncaster.
Our business for the next twelve months does not include any product
research and development other than investigating the manufacturers of cosmetics
and skin care that market their merchandise through direct selling. In order to
investigate these manufacturers, we will:
o contact the Direct Selling Association for the names and
addresses of cosmetic manufacturers;
o research magazines and newspapers for advertisements placed by
cosmetic manufacturers;
o use the Internet as a search and research tool on cosmetic
manufacturers.
12
<PAGE>
Once we identify a cosmetic manufacturer that we are interested in, either
Mr. Gottbetter or Mrs. Gottbetter will contact the manufacturer to discuss the
possibility of Harmony becoming a direct seller of the products. We anticipate
that it may take up to six months for us to find a company whose product
interests us.
We do not expect to purchase any plant or significant equipment in the
next twelve months and we do not own any plant or significant equipment to sell.
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.
Since December 1998, our management had devoted the majority of its
efforts to obtaining new customers for our products, pursuing and finding a
management team to continue the process of completing its marketing goals,
marketing limited quantities of the Doncaster Line, and obtaining sufficient
working capital through loans and equity through a private placement offering.
These activities were funded by our management and investments from
stockholders.
Results of Operations for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998.
For the nine months ended September 30, 1999, Harmony generated net sales
of $14,825 as compared to $0 for the nine months ended September 30, 1998
representing an increase of $14,825. Our cost of goods sold for the nine months
ended September 30, 1999 was $0 as compared to $0 for the nine months ended
September 30, 1998. Our gross profit on sales was $12,131 for the three months
ended September 30, 1999 as compared to $0 for three months ended September 30,
1998. The increase in gross profit is the result of offering for sale the
Doncaster Line in the reorganization of our business.
Harmony's general and administrative costs aggregated approximately
$19,324 for the three months ended September 30, 1999 as compared to $750 for
the three months ended September 30, 1998 representing an increase of $16,324.
This increase represents office and computer expenses of $13,601, rent of $750,
salary of $1,500 and commissions of $3,473.
Results of Operations for the period of inception, August 13, 1996 through
September 30, 1999.
For the period from our inception, August 13, 1996, through September 30,
1999, a period of approximately 37 months, we generated net sales of $18,825 (an
average of $509 per month). Our cost of goods sold on sales was approximately $0
for the period from our inception, August 13, 1996, through September 30, 1999.
The gross profit from sales for this 34 month period is $18,825. Management
believes the gross profit of an average of $509 for the period from inception,
August 3, 1996, through September 30, 1999, will improve and stabilize once our
marketing plans become fully implemented.
13
<PAGE>
Harmony's general and administrative costs aggregated approximately
$54,885 for the period from inception, August 13, 1996, through September 30,
1999. Of these initial startup costs, approximately $21,436 is attributed to
telephone and other office expenses, $5,699 in commissions, $23,000 in salary
and $4,750.
Liquidity and Capital Resources
Harmony increased liquidity by $17,117 from a cash balance at our
inception of $0 through the process of developing profits for sales, loans by
our principal shareholders and the completion of a private placement with net
proceeds to Harmony aggregating $18,565.
We expended an aggregate of $18,825 for operating expenses and reduced our
notes payable by $592 through September 30, 1999. In April 1999, our company
sold under Rule 504 of Regulation Do of the Securities Act of 1933, as amended,
an aggregate of 505,000 shares of common stock at $0.05 per share for an
aggregate cash consideration of $25,250 and the sale of 50,000 shares of common
stock in consideration for $2,500 in legal services less $6,685 in offering
expenses. On September 16, 1999, Harmony 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.
Income Tax
As of September 30, 1999, Harmony had a tax loss carry-forward of $35,788.
Our ability to utilize its tax credit carry-forwards in future years will be
subject to an annual limitation pursuant to the "Change in Ownership Rules"
under Section 382 of the Internal Revenue Code of 1986, as amended. However, any
annual limitations not expected to have a material adverse effect on our ability
to utilize our tax credit carry-forwards.
We expect our capital requirements to increase over the next several years
as we continue to develop our business, increase sales and administration
infrastructure and embark on developing in-house business capabilities and
facilities. Our future liquidity and capital funding requirements will depend on
numerous factors, including the extent to which our company's present management
can fund the continued capital requirements, the costs and timing of expansion
of sales, marketing activities, facilities expansion needs, and competition in
the business entered into.
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.
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
14
<PAGE>
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
Cash and cash equivalents ..................................... $ 17,117
========
Current Liabilities ........................................... 30,465
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 ..................................................... (35,788)
Total shareholders' equity ................................ (13,348)
--------
Total capitalization ................................. $(13,348)
========
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.
15
<PAGE>
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.
The selling shareholders may be considered to be underwriter under the
Securities Act. We are not currently planing to register the shares of common
stock owned by the selling shareholders in any state. Various states may have
exemptions from the registration requirements of their securities act that would
allow the selling shareholders to sell their shares to others. Various states
have exemptions from the registration requirements for securities that allow
securities to be sold in non-issuer transactions. The selling shareholders are
not issuers of the shares and may be able to rely on these exemptions. If the
selling shareholders are not able to rely on these non-issuer exemptions, we
will assist the selling shareholders in registering or qualifying the shares for
sale in the particular state.
Any person that purchases the shares of common stock from a selling
shareholder will be able to resell the shares under state secondary market sales
exemptions.
The states may permit secondary market sales of the securities:
o once we publish the necessary financial and other information about
ourselves in a recognized securities manual. These manuals include
Standard & Poor's Corporation Records, Moody's and Fitches.
o after a time period required by that state has elapsed from the date
we issued the securities.
o under exemptions that may apply to some investors based upon the
investors qualifications.
o as a reporting company under the Securities Exchange Act of 1934;
and
o as covered securities under section 18(b)(4)(A) of the Securities
Act, as long as any notice and fee requirements of the states have
been met.
16
<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:
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., her
own company, that provides fashion and image consulting services. From 1994 to
1996, Ms. Winley was employed as a sales manager of the dress division of Nancy
Crystal, a private label blouse and dress manufacture
17
<PAGE>
and from 1996 to 1998, Ms. Winley was employed as a sales manager by Nira Nira,
a private label manufacturer of women's clothing that is primarily sold to
catalog companies. Ms. Winley regularly presents workshops, seminars and gives
speeches on how clothing affects people and the manner in which they are
perceived by others. Ms. Winley is a graduate of the Fashion Institute of
Technology.
Executive Compensation
The following table shows the compensation that we have paid to our chief
executive officer. No executive officer, including our chief executive officer
receives a total annual salary and bonus of over $100,000.
Name of Officer Year Salary
- -------------------------------------------------------------------------------
Paul B. Gottbetter, president 1999 $6,000
CEO, director, treasurer 1998 $6,000
1997 $6,000
Principal and Selling Shareholders
The following tables shows the numbers of shares and percentage of common
stock held by the officers and directors of Harmony and holders of five percent
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 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*
- --------------------------------------------------------------------------------------------
<S> <C> <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, Ltd 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
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Common Stock, par Adam S. Gottbetter 277,333 shares 8.91%
value $.001 per share 1035 Park Avenue, Apt. 5B
New York, New York 1002 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>
The information in the table above and below is based on 3,110,000 issued
and outstanding shares of common stock. The sole shareholder of Turbo
International Ltd. is Martin Christen and Turbo's ownership of the shares can be
attributed to him. The sole shareholder of Turf Holdings Ltd. is Vijendran
Paniah and Turf's ownership of the shares can be attributed to him. Mr. Adam
Gottbetter owns 277,333 shares, of which 244,000 are included in this
prospectus.
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*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <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 Less
value $.001 per share 18 Burdge Drive than 1%
Middletown, New Jersey 07748
All officers and directors 1,735,000 shares 55.78%
as a group (2 persons)
</TABLE>
19
<PAGE>
Securities Ownership of Selling Shareholders
<TABLE>
<CAPTION>
Before the Offering After the Offering
- -------------------------------------------------------------------------------------------------------------------
Name of
Selling No. of Percentage of No. of Percentage
Shareholder Shares Common Stock Shares of Stock
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Best, Ula 600 * 0 *
Borofsky, Jeffrey M. 600 * 0 *
Bunton, Alfred 600 * 0 *
Coder, Kenneth 600 * 0 *
Cohen, Kenneth M. 600 * 0 *
Coker, Jr., Peter 600 * 0 *
Coker, Sr., Peter 600 * 0 *
Connaughton, Amanda 600 * 0 *
Conte, Michael C. 600 * 0 *
Davenport, Karen 600 * 0 *
Feifer, Fred 600 * 0 *
Gottbetter, Adam S. 277,333 8.91 % 33,333 1.07%
Gottbetter, Daniel 600 * 0 *
Gottbetter, Franklyn 600 * 0 *
Hinojosa Jr., Milton 600 * 0 *
Howard, L. Meredith 600 * 0 *
Inemer, Steve 600 * 0 *
Inemer, Ira H. 600 * 0 *
Kass, Barbara 600 * 0 *
Lande, Ted 600 * 0 *
Levine, Pearl 600 * 0 *
Levner, Lawrence 600 * 0 *
Martin, LaFaye 600 * 0 *
Menon, U.K. 200,000 6.43 % 0 *
Miller, Jules 600 * 0 *
Peate, Florence 600 * 0 *
Perry, Nicola 600 * 0 *
Rabuse, Nancy 600 * 0 *
Redlich, Meyer 600 * 0 *
Rubenstein, Florence 600 * 0 *
Schweitzer, Arthur 600 * 0 *
Turbo International, Ltd. 300,000 9.64 % 0 *
Turf Holding Ltd. 300,000 9.64 % 0 *
Vaswani, Rani 600 * 0 *
Venturini, August C. 600 * 0 *
Winley, Roberta 600 * 0 *
Wojnar, Peter F. 600 * 0 *
Zephir, Barbara 600 * 0 *
Ziluck, Scott 600 * 0 *
Zimmerli, Otto 200,000 6.43 % 0 *
</TABLE>
- ----------
* Denotes less than 1% of the issued and outstanding shares of common stock.
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
20
<PAGE>
estimate the number of shares that will be held by the selling shareholders. For
purposes of the above table, we have assumed that all 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.
Certain Relationships and Related Transactions
There have been no transactions exceeding $60,000 in the past two years
and there are no proposed transactions that exceed $60,000 to which we were or
are to be a party and any of our directors, executive officers, security holders
owning more than 5% of our common stock or any immediate family members of these
people had a direct or indirect material interest.
Paul B. Gottbetter, our president, can be deemed to be a promoter of
Harmony. Mr. Gottbetter was issued 200 shares of our common stock as
consideration for his efforts in founding Harmony. (See "Management")
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 non- assessable. 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.
21
<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.
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."
22
<PAGE>
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 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.
23
<PAGE>
Holders
There are approximately forty-four (44) record holders of common equity.
Dividends
As of the date of this prospectus, 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.
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.
24
<PAGE>
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(973) 790-8775
Fax (973) 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 31, September 30,
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 $ 21,000 $ 28,473
Corporate taxes payable $ 325 259
Officer loans payable 2,325 1,733
-------- --------
Total current liabilities $ 23,650 $ 30,465
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 (20,650) (35,788)
-------- --------
Total stockholders' equity (19,650) (13,348)
-------- --------
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 Sept. 30, 1998 Sept 30, 1999 to Sept. 30, 1999
Dec.31,1997 Dec. 31,1998 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 0and administrative 10,865 10,785 8,000 30,235 4,885
------ ------ ----- ------ -----
Total expense 10,865 10,785 8,000 30,235 4,885
Income (loss) from operations $(6,865) $(10,785) (8,000) (15,410) (36,060)
Other income
Interest income 272 272
--- ---
Total Other Income
Income (loss) $(6,865) $(10,785) $(7,728) $(15,410) $(35,788)
======== ========= ======== ========= =========
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>
Deficit
accumulated
Additional during
Common Common paid in 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 $ (9,865) $ (9,865)
--------- ------ --------- -------- --------
December 31, 1997
balance 1,000,000 1,000 $ (9,865) $ (8,865)
Net loss (10,785) (10,785)
--------- ------ --------- -------- --------
December 31, 1998
balance 1,000,000 1,000 ($20,650) (19,650)
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 (15,410) (15,410)
--------- ------ --------- -------- --------
September 30, 1999
balance 1,555,000 $1,555 $ 20,885 $(35,788) $(13,348)
========= ====== ========= ======== ========
September 30, 1999 Adjusted
balances for 2 for 1 forward
split 3,110,000 $3,110 $ 19,330 $(35,788) $(13,348)
========= ====== ========= ======== ========
</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) $(16,865) $(10,785) $ (7,728) $(15,410) $(35,788)
Non cash transaction 1,000 2,875 3,875
Corporate taxes 325 (66) 259
-------- -------- --------
Accounts payable and accrued 5,865 9,000 7,228 7,745 28,009
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 -0- 1,460 -0- -0- -0-
-------- -------- -------- -------- --------
PERIOD
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 $35,788 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 unaudited balance sheet as of September
30, 199, and the related statements of operations and cash flows and
stockholders' equity for the year ending December 31, 1998, and the related
unaudited statements of operations and cash flows and stockholders' equity for
the nine months ending 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.
Commission income 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 amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
F-7
<PAGE>
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 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
F-8
<PAGE>
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.
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 for a rent of $250 per month on a
month-to-month basis.
F-9
<PAGE>
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.
d. Officer Salaries
For the period from inception, August 13, 1996, to December 31, 1996, for
the year ending December 31, 1997, for the year ending December 31, 1998 and for
the nine months ended September 30, 1999, the Company has accrued a minimal
compensation of $500 per month as compensation to Mr. Gottbetter as
consideration for services while the Company is in the development stage of
development as follows: $2,000, $6,000, $6,000 and $4,500.
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 $35,788. 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 $ 12,168
Valuation allowance $(12,168)
--------
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..........................................................6
MANAGEMENT'S DISCUSSION AND ANALYSIS / PLAN OF OPERATION....................11
USE OF PROCEEDS.............................................................14
CAPITALIZATION..............................................................15
DIVIDEND POLICY.............................................................15
PLAN OF DISTRIBUTION........................................................15
MANAGEMENT..................................................................17
PRINCIPAL AND SELLING SHAREHOLDERS..........................................18
DESCRIPTION OF SECURITIES...................................................21
EXPERTS.....................................................................22
LEGAL MATTERS...............................................................22
LEGAL PROCEEDINGS ..........................................................22
MARKET FOR COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS..................................................22
WHERE YOU CAN FIND ADDITIONAL
INFORMATION................................................................24
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.
1,265,000 Shares Common Stock
------------------
P R O S P E C T U S
------------------
February , 2000
================================================================================
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 $ 16.70
-------------
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 under Section 4(2) of the Securities Act.
In the summer of 1998, Paul Gottbetter transferred an aggregate of 7,500
shares to 25 people in consideration of the assistance and support these people
gave to Harmony during the period in which they were preparing our first show
for Doncaster. These transfers were made under Sections 4(1) and 4(2) of the
Securities Act.
Paul Gottbetter initially considered these transfers to be gifts, but upon
re-evaluation of the transfers, realized that the transfers could be deemed
sales under the Securities Act because we indirectly derived a benefit from
these people. Section 4(1) provides for an exemption from the registration
requirements of the Securities Act for transactions by any persons other than an
29
<PAGE>
issuer, underwriter or dealer. Section 4(2) provides for an exemption from the
registration requirements by an issuer not involving any public offering.
The value of the services provided by these 25 persons and the value of
the shares was $375.
In January 1999, Paul Gottbetter made a gift of 25 shares (pre-split) to
his son, Adam Gottbetter. In April 1999, Adam Gottbetter transferred an
aggregate of 3,000 (post-split) shares to ten (10) people who were employees of
Adam Gottbetter's law firm, Kaplan Gottbetter & Levenson, LLP. These transfers
were made under Section 4(1) of the Securities Act.
Adam Gottbetter initially considered these transfers to be gifts. Upon
re-evaluation of these transfers, he realized that the transfers could be deemed
sales under the Securities Act because his law firm derived a benefit from these
ten (10) people.
On April 6, 1999, Harmony closed its offering of common stock under Rule
504 of Regulation D promulgated under the Securities Act. Harmony sold 555,0000
shares of its common stock, at a price of $.05 per share, aggregating $27,750.
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
10* Fashion Consultant Agreement dated as of December 7, 1998, by
and between Tanner Companies Limited Partnership and
Falene R. Gottbetter
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.
30
<PAGE>
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
(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
February 10, 2000.
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 February 10, 2000
- --------------------------------------------------------------------------------
(Signature) (Title) (Date)
/s/ Michael C. Conte Secretary and Director February 10, 2000
- --------------------------------------------------------------------------------
(Signature) (Title) (Date)
32
[LETTERHEAD OF KAPLAN GOTTBETTER & LEVENSON, LLP]
February 10, 2000
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 1,265,000 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
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 1,265,000 shares of its common stock.
/s/ Thomas P. Monahan
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THOMAS P. MONAHAN
February 10, 2000
Paterson, New Jersey
