VAPORIN, INC. - FORM 10-Q - November 10, 2011

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - VAPORIN, INC.	Financial_Report.xls
EX-31.1 - EXHIBIT 31.1 - VAPORIN, INC.	v238595_ex31-1.htm
EX-32.1 - EXHIBIT 32.1 - VAPORIN, INC.	v238595_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - VAPORIN, INC.	v238595_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

¨ TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _____________

Commission file number 333-171277

FELAFEL CORP.

A Delaware Corporation

I.R.S. Employer No. 80-0546288

c/o Idan Karako

27 Bet Hillel Street, Unit 18

Tel Aviv Israel 67017

Phone number: +972-54-6419419

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer ¨	Smaller reporting company x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 1, 2011, 10,333,333 shares of Common Stock, par value $0.0001 per share, were outstanding.

Table of Contents

		Page
Item	Description
PART I - FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis or Plan of Operation	2

Item 4T	Controls and Procedures	5

PART II - OTHER INFORMATION		6
Item 1.	Legal Proceedings	6
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6
Item 3.	Defaults Upon Senior Securities	6
Item 4.	Submission of Matters to a Vote of Security Holders	6
Item 5.	Other Information	6
Item 6.	Exhibits	6
Signatures		7
Exhibit Index

FELAFEL CORP.

(A DEVELOPMENT STAGE COMPANY)

INDEX TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2011

Financial Statements-

Balance Sheets as of September 30, 2011 and December 31, 2010	F-2

Statements of Operations for the Three Months and Nine Months Ended September 30, 2011 and 2010, and Cumulative from Inception	F-3

Statement of Stockholders’ Equity for the Period from Inception through September 30, 2011	F-4

Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010, and Cumulative from Inception	F-5

Notes to Financial Statements	F-6

F-1

FELAFEL CORP.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010

	As of			As of
	September 30,			December 31,
	2011			2010
	(Unaudited)			(Audited)

ASSETS
Current Assets:
Cash and cash equivalents	$	13,419		$	19,050
Deferred offering costs		-			19,000
Total current assets		13,419			38,050

Total Assets		13,419			38,050

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued expenses		2,000			9,516
Loans payable - directors and officers		3,684			-
Total Current Liabilities		5,684			9,516

Commitments and Contingencies

Stockholders' Equity (Deficit):
Common stock, par value $0.0001 per share, 200,000,000 shares authorized;
10,333,333 and 9,000,000 shares issued and outstanding, respectively		1,033			900
Additional paid-in capital		53,667			39,800
(Deficit) accumulated during development stage		(46,965	)		(12,166	)

Total stockholders' equity (deficit)		7,735			28,534

Total Liabilities and Stockholders' Equity	$	13,419		$	38,050

The accompanying notes to financial statements are

an integral part of these statements.

F-2

FELAFEL CORP.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010,

AND CUMULATIVE FROM INCEPTION (JUNE 2, 2009)

THROUGH SEPTEMBER 30, 2011

(Unaudited)

	Three Months			Three Months			Nine Months			Nine Months			Cumulative
	Ended			Ended			Ended			Ended
	September 30,			September 30,			September 30,			September 30,			From
	2011			2010			2011			2010			Inception

Revenues	$	20,000		$	-		$	20,000		$	-		$	20,000

Expenses:
General and administrative-
Professional fees		39,755			3,000			42,755			4,000			46,755
Filing fees		1,883			-			11,509			-			13,900
SEC commission		-			-			-			-			250
Travel		-			4,880			-			4,880			4,880
Other		324			318			534			334			1,104

Total general and administrative expenses		41,962			8,198			54,798			9,214			66,890
														-
(Loss) from Operations		(21,962	)		(8,198	)		(34,798	)		(9,214	)		(46,890	)

Other Income (Expense)		-			(75	)		-			(75	)		(75	)

Provision for income taxes		-			-			-			-			-

Net (Loss)	$	(21,962	)	$	(8,273	)	$	(34,798	)	$	(9,289	)	$	(46,965	)

(Loss) Per Common Share:
(Loss) per common share - Basic and Diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Weighted Average Number of Common Shares Outstanding - Basic and Diluted		10,275,362			7,717,391			9,429,792			7,241,758

The accompanying notes to financial statements are

an integral part of these statements.

F-3

FELAFEL CORP.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE PERIOD FROM INCEPTION (JUNE 2, 2009)

THROUGH SEPTEMBER 30, 2011

(Unaudited)

										(Deficit)
										Accumulated
					Stock			Additional		During the
	Common stock				Subscriptions			Paid-in		Development
Description	Shares		Amount		Receivable			Capital		Stage			Totals

Balance - at inception		-	$	-	$	-		$	-	$	-		$	-

Common stock issued for cash ($0.0001/share)		7,000,000		700		(700	)		-		-			-

Net (loss) for the period		-		-		-			-		-			-

Balance -December 31, 2009		7,000,000		700		(700	)		-		-			-

Common stock issued for cash ($ 0.02/share)		2,000,000		200		-			39,800		-			40,000

Stock subscriptions payment received		-		-		700			-		-			700

Net (loss) for the period		-		-		-			-		(12,166	)		(12,166	)

Balance -December 31, 2010		9,000,000		900		-			39,800		(12,166	)		28,534

Common stock issued for cash ($ 0.03/share)		1,333,333		133					13,867					14,000

Net (loss) for the period		-		-		-			-		(34,798	)		(34,798	)

Balance - September 30, 2011		10,333,333	$	1,033	$	-		$	53,667	$	(46,965	)	$	7,735

The accompanying notes to financial statements are

an integral part of these statements.

F-4

FELAFEL CORP.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010, AND

CUMULATIVE FROM INCEPTION (JUNE 2, 2009)

THROUGH SEPTEMBER 30, 2011

(Unaudited)

	Nine Months Ended			Nine Months Ended			Cumulative
	September 30,			September 30,			From
	2011			2010			Inception

Operating Activities:
Net (loss)	$	(34,798	)	$	(9,289	)	$	(46,965	)
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Changes in net assets and liabilities-
Accounts payable and accrued expenses		(7,517	)		-			1,999

Net Cash Provided by (Used in) Operating Activities		(42,315	)		(9,289	)		(44,966	)

Investing Activities:
Cash provided by investing activities		-			-			-

Net Cash Provided by Investing Activities		-			-			-

Financing Activities:
Proceeds from shareholder loans		3,684			-			3,684
Offering costs		(7,000	)		-			(26,000	)
Proceeds from common stock		40,000			40,000			80,700

Net Cash Provided by Financing Activities		36,684			40,000			58,384

Net (Decrease) Increase in Cash		(5,631	)		30,711			13,419

Cash - Beginning of Period		19,050			-			-

Cash - End of Period	$	13,419		$	30,711		$	13,419

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	-		$	-		$	-
Income taxes	$	-		$	-		$	-

The accompanying notes to financial statements are an integral part of these statements.

F-5

FELAFEL CORP.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation and Organization

Felafel Corp. (the “Company”) is in the development stage, and has limited operations. The Company was incorporated under the laws of the State of Delaware on June 2, 2009. The business plan of the Company is to become a leading falafel fast-food retail chain in the Baltic States. The accompanying financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.

Unaudited Interim Financial Statements

The interim financial statements of the Company as of September 30, 2011, and for the periods then ended, and cumulative from inception, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 30, 2011, and the results of its operations and its cash flows for the periods ended September 30, 2011, and cumulative from inception. These results are not necessarily indicative of the results expected for the calendar year ending December 31, 2011. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited financial statements as of December 31, 2010, filed with the SEC, for additional information, including significant accounting policies.

Cash and Cash Equivalents

For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.

Revenue Recognition

The Company recognizes revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.

Loss per Common Share

Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the period ended September 30, 2011.

F-6

Income Taxes

The Company accounts for income taxes pursuant to FASB ASC 740. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.

Fair Value of Financial Instruments

The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of September 30, 2011 and December 31, 2010, the carrying value of accounts payable-trade and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments.

Deferred Offering Costs

The Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated.

Common Stock Registration Expenses

The Company considers incremental costs and expenses related to the registration of equity securities with the SEC, whether by contractual arrangement as of a certain date or by demand, to be unrelated to original issuance transactions. As such, subsequent registration costs and expenses are reflected in the accompanying financial statements as general and administrative expenses, and are expensed as incurred.

Lease Obligations

All non cancellable leases with an initial term greater than one year are categorized as either capital leases or operating leases. Assets recorded under capital leases are amortized according to the methods employed for property and equipment or over the term of the related lease, if shorter.

Estimates

The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of September 30, 2011 and December 31, 2010, and expenses for the three months and nine months ended September 30, 2011 and 2010, and cumulative from inception. Actual results could differ from those estimates made by management.

Fiscal Year End

The Company has adopted a fiscal year end of December 31.

F-7

2. Development Stage Activities and Going Concern

The Company is currently in the development stage, and has limited operations. The business plan of the Company is to become a leading falafel fast-food retail chain in the Baltic States.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation of the Company as a going concern. The Company has incurred an operating loss since inception. Further, as of September 30, 2011 the cash resources of the Company were insufficient to meet its current business plan. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

3. Common Stock

On June 3, 2009, the Company issued 5,000,000 shares of common stock the director of the Company, for a $500 subscription receivable. Payment of the subscription was received by December 31, 2010.

On December 21, 2009, the Company issued 2,000,000 shares of common stock to a secretary of the Company, for a $200 subscription receivable. Payment of the subscription was received by December 31, 2010.

On April 2, 2010, the Company began a capital formation activity through a PPO, exempt from registration under the Securities Act of 1933, to raise up to $40,000 through the issuance of 2,000,000 shares of its common stock, par value $0.0001 per share, at an offering price of $0.02 per share. As of August 28, 2010, the Company had received $40,000 in proceeds from the PPO.

The Company filed a Registration Statement on Form S-1 to the SEC to register and sell in a self-directed offering 3,333,333 shares of newly issued common stock at an offering price of $0.03 per share for proceeds of up to $100,000. As of August 31, 2011, the Company raised $40,000 in proceeds with the issuance of 1,333,333 shares of its common stock from this offering. Legal and accounting fees relating to this registration statement and offering were $26,000.

Additionally, the Company registered 2,000,000 shares of its outstanding shares of common stock on behalf of selling stockholders with the Registration Statement on Form S-1. The Company did not receive any of the proceeds from the sales of these 2,000,000 shares.

4. Income Taxes

The provision (benefit) for income taxes for the periods ended September 30, 2011 and 2010, were as follows (assuming a 23% effective tax rate):

F-8

	2011			2010

Current Tax Provision:
Federal-
Taxable income	$	-		$	-

Total current tax provision	$	-		$	-

Deferred Tax Provision:
Federal-
Loss carryforwards	$	8,004		$	2,137
Change in valuation allowance		(8,004	)		(2,137	)

Total deferred tax provision	$	-		$	-

The Company had deferred income tax assets as of September 30, 2011 and December 31, 2010 as follows:

	2011			2010

Loss carryforwards	$	10,802		$	2,798
Less - Valuation allowance		(10,802	)		(2,798	)

Total net deferred tax assets	$	-		$	-

The Company provided a valuation allowance equal to the deferred income tax assets for periods ended September 30, 2011 and December 31, 2010 because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards.

As of June 30, 2011, the Company had approximately $46,965 in tax loss carryforwards that can be utilized future periods to reduce taxable income, and expire by the year 2031.

The Company did not identify any material uncertain tax positions on tax returns that were or will be filed. The Company did not recognize any interest or penalties for unrecognized tax benefits.

The federal income tax returns of the Company are subject to examination by the IRS, generally for three years after they are filed.

5. Related Party Loans and Transactions

On June 3, 2009, the Company issued 5,000,000 shares of common stock to the director of the Company, for a $500 subscription receivable. Payment of the subscription was received by December 31, 2010.

On December 21, 2009, the Company issued 2,000,000 shares of common stock to the secretary of the Company, for $200 subscription receivable. Payment of the subscription was received by December 31, 2010.

As of September 30, 2011, loans from related parties amounted to $3,684 and represented working capital advances from Directors who are also stockholders of the Company. The loans are unsecured, non-interest bearing, and due on demand.

The Company's president and director provides rent-free office space to the Company.

F-9

6. Recent Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRSs")." Under ASU 2011-04, the guidance amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S. GAAP and in IFRS and that their respective fair value measurement and disclosure requirements are the same. ASU 2011-03 is effective for public entities during interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Company does not believe that the adoption of ASU 2011-04 will have a material impact on the Company's results of operation and financial condition.

In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income," ("ASU 2011-05") which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders' equity. Instead, comprehensive income must be reported in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after Dec. 15, 2011 with early adoption permitted. The Company does not believe that the adoption of ASU 2011-05 will have a material impact on the Company's results of operation and financial condition.

There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's financial position, results of operations or cash flows.

7. Subsequent Event

In October 2011, the Company entered into an agreement in principle with Kinsolin Ltd., a Latvian corporation pursuant to which Kinsolin has purchased from the Company for $85,000 (the “Franchise Fee”) the right to become the Company’s country master franchisor for the Republic of Estonia. The Company received the Franchise Fee in October and November 2011.

Over the course of the fourth quarter of 2011, the Company and Kinsolin hope to enter into a definitive master franchise agreement, pursuant to which it is anticipated that Kinsolin will be the Company’s exclusive franchisor in Latvia for a period of five years beginning on January 1, 2012, subject to renewal. In addition, Kinsolin will pay annual royalties to the Company in an amount equal to 3% of gross sales. The minimum annual royalty will be $50,000 for calendar years beginning on and after January 1, 2013. We will have the right to cancel the agreement in the event that Kinsolin does not open any restaurants by June 30, 2012.

F-10

Item 2. Management's Discussion and Analysis or Plan of Operations

As used in this Form 10-Q, references to the “Company,” “Felafel,” “we,” “our” or “us” refer to Felafel Corp. unless the context otherwise indicates.

This Management’s Discussion and Analysis or Plan of Operations should be read in conjunction with the financial statements and the notes thereto included elsewhere in this report and with the Management's Discussion and Analysis or Plan of Operations and the financial statements for the year ended December 31, 2010 and for the period ended March 31, 2011, and the notes thereto included in our Registration Statement on Form S-1, which became effective on June 3, 2011.

Forward-Looking Statements

This Management’s Discussion and Analysis or Plan of Operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates, forecasts and projections about us, our future performance, the industry in which we operate our beliefs and our management’s assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to assess. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

For a description of such risks and uncertainties refer to our Registration Statement on Form S-1 (Registration No. 333-171277) filed with the Securities and Exchange Commission, which became effective on June 3, 2011. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not have any intention or obligation to update publicly any forward-looking statements or risk factors included herein, whether as a result of new information, future events, changes in assumptions or otherwise.

Plan of Operation

Results of Operations

For the period ended September 30, 2011, we had revenues of $20,000, compared to the period ended September 30, 2010 in which we had no revenues. The $20,000 revenues were funds received in the reporting period from consulting work that we performed during the quarter. Expenses increased from $8,198 in the period ended September 30, 2010 to $41,962 in the period ended September 30, 2011. This increase was mainly a result of the expenses relating to our registration statement, which were paid during the reporting period.

For the period ended September 30, 2011, we incurred a net loss of $21,962, as compared to a net loss of $8,198 in the period ended September 30, 2010. The increase in losses resulted from the expenses relating to our registration statement. Our cumulative net loss during the period from June 2, 2009 (inception) through September 30, 2011 was $46,890.

During the month of July 2011, we received subscriptions in an amount equal to $40,000, and we therefore met the minimum offering requirement under our Registration Statement on Form S-1.

Liquidity and Capital Resources

We estimate that we will require approximately $100,000 for the next 12 months of operations, including the costs of opening our pilot restaurant with new equipment on a fully-equipped basis. Since we did not raise the maximum amount, that we sought to raise in our initial public offering, we may do without some equipment, buy some equipment used, and cut back on some budget items. Assuming that we lease a restaurant location rather than buying it, we expect to incur a minimum of $100,000 in expenses during the next 12 months of operations assuming that we open our pilot restaurant with new equipment on a fully-equipped basis. The following amounts were what we intended to spend on opening our pilot restaurant at the time of our initial public offering. In light of the moneys received from our Estonian master franchisor (discussed below), and in light of the fact that we now know that we raised $40,000 in our initial public offering, we are currently reevaluating these amounts.

	100%		80%		60%		40%
Design, Legal fee, Store construction and ventilation	$	33,777	$	20,000	$	20,000	$	13,000
Signage	$	2,649	$	2,649	$	2,649	$	2,649
Initial Marketing and inventory and working capital	$	10,597	$	10,597	$	7,500	$	6,000
Display Unit	$	6,755	$	6,755	$	1,351	$	1,351
Table counter	$	1,987	$	1,987	$	1,000	$	1,000
Six Chairs	$	795	$	795	$	200	$	200
Counter	$	1,987	$	1,987	$	800	$	800
Electronic till and stock level counter	$	2,649	$	2,649	$	530	$	530
Two refrigerators	$	3,852	$	770	$	770	$	770
Drinks fridge	$	583	$	583	$	583	$	583
Store room shelving	$	397	$	397	$	100	$	100
Automatic Felafel maker and fryer	$	5,298	$	1,060	$	1,060	$	1,060
Mixer/blender	$	1,824	$	1,824	$	365	$	365
Stainless Steel pans	$	583	$	583	$	583	$	583
Heating	$	2,000	$	2,000	$	1,000	$	1,000
Creation of web site	$	2,649	$	2,000	$	0	$	0
Accounting costs	$	1,325	$	1,325	$	1,325	$	1,325
Operating costs during pre-opening period (payroll, rent, utilities, etc)	$	6,431	$	6,431	$	6,431	$	6,431
Advertising Costs	$	13,246	$	13,246	$	13,246	$	1,500
Total Opening Costs	$	99,384	$	77,638	$	59,493	$	39,247

Additionally, $15,000 will be needed for general working capital, which was not included in our initial public offering, and which we hope to fund out of operations.

We do not have sufficient resources to effectuate our current business plan. As of November 6, 2011, we had $92,718 available in cash.

Plan of Operation

Our original plan was to open and operate one company-owned restaurant in Riga, Latvia, which would serve as our pilot restaurant. We chose to locate the pilot restaurant in Riga, because our management team knows the city of Riga well and feels that it is capable of operating our pilot restaurant there. We concluded our offering in August 2011.We estimate that we will require $100,000 to establish our pilot restaurant at the full standard we desire. We believed that it would take us approximately three months from the date that the offering is completed to find and prepare a location and to open our pilot restaurant. Therefore, we anticipated that we would open our pilot restaurant in Riga in November 2011.

However, as discussed below, we have recently entered into an agreement in principle appointing Kinsolin Ltd., a Latvian corporation (“Kinsolin”), as our master franchisor for the Republic of Estonia. As such, it is possible that the first restaurant to open under the Felafel name will be in Estonia and not in Latvia. However, we are still working toward opening a restaurant in Riga.

We anticipate that once a restaurant opens, it will start to generate cash.

Of course, there can be no assurance that any of these predictions is accurate or will ever materialize.

In the first year of operation, costs will be directed to launching and operating the pilot restaurant. Funds generated to finance this start-up will come from initial shares sold and from the franchise fee paid to us by Kinsolin. We have not yet decided whether we will use the full amount we had budgeted for our pilot restaurant in Latvia. We may supplement the moneys we raised in our offering with moneys received from Kinsolin, or we may launch our pilot restaurant at a lower cost, commensurate with the amount we raised in the offering, by reducing some budget items and purchasing some equipment used rather than new. See the chart under Liquidity and Capital Resources.

We expect to sign a one-year lease for the pilot restaurant location. We have already begun to investigate suitable locations for the pilot restaurant. We anticipate that the amounts in the budget chart will cover the costs of finding the store location and the first year’s rent.

We anticipate spending between $5,000 and $20,000 to make the rental location suitable for our pilot restaurant. Since we raised less than the maximum amount in the offering, we may reduce the amount that we spend on this item by using less expensive materials or we may use some of the moneys we received from Kinsolin for our restaurant in Riga.

. We anticipate that this process will take approximately two months and include the following steps:

• Assembling the interior and exterior décor

• Connecting the plumbing and the required electric wiring

• Installing the necessary kitchen appliances including refrigerator(s), a felafel maker, a mixer and a salad station

• Obtaining the required certificate of occupancy, regulatory licenses, and certifications

• Setting up the cash register and utilities

• Hiring and training personnel

• Food testing and pre-opening trial runs

The chart contained in Liquidity and Capital Resources sets out the costs associated with purchasing the materials we need for setting up our pilot restaurant. During the pre-opening period, we also anticipate that we will need to pay operational costs like payroll, rent and utilities. These costs are included in the chart.

Estonian Franchise

In October 2011, we entered into an agreement in principle with Kinsolin Ltd., a Latvian corporation (“Kinsolin”) pursuant to which Kinsolin has purchased from us for $85,000 (the “Franchise Fee”) the right to become our country master franchisor for the Republic of Estonia. During October and November 2011, Kinsolin paid the Franchise Fee in full.

We will train Kinsolin’s employees in restaurant operations. In the event that we have opened a restaurant in Riga, Latvia, as is planned, by the time that Kinsolin’s employees are ready to be trained, we will train Kinsolin’s employees in Latvia. If no such restaurant is opened by the time Kinsolin's employees are ready to be trained, Kinsolin’s employees will travel to Israel at Kinsolin’s expense to train with Idan Karako in Israel.

The definitive contract will include provisions that require our approval for restaurant design and for the felafel’s ingredients. It is anticipated that the felafel will come from Israel, but pita bread, vegetables and other necessary ingredients will be purchased locally, subject to our approval.

The price of a felafel sandwich will be agreed between Felafel and Kinsolin.

This is only a summary of the agreement between Felafel and Kinsolin, and is qualified in its entirety by reference to the full agreement, when and if it is executed.

Additional Equity Raises

On June 3, 2009, we issued 5,000,000 shares of common stock to Mr. Idan Karako, our President, Chief Executive Officer, Treasurer and Director, for a $500 subscription receivable, which has since been paid.

On December 21, 2009, we issued 2,000,000 shares of common stock to Ms. Viktorija Eglinskaite-Dijokiene, our Secretary and Director, for a $200 subscription receivable, which has since been paid.

On April 2, 2010, the Company began a capital formation activity through a Private Placement Offering, exempt from registration under the Securities Act of 1933, to raise up to $40,000 through the issuance of 2,000,000 shares of its common stock, par value $0.0001 per share, at an offering price of $0.02 per share.

The $0.02 per share price was determined arbitrarily by the Company. It did not necessarily bear any relationship to the Company’s assets’ value, net worth, revenues, or other established criteria of value, and should not be considered indicative of the actual value of the shares. As of August 28, 2010, the Company

had received $40,000 in proceeds from the Private Placement Offering.

The Company commenced a capital formation activity by filing a Registration Statement on Form S-1 to the SEC to register and sell in a self-directed offering 3,333,333 shares of newly issued common stock at an offering price of $0.03 per share for proceeds of up to $100,000. The Registration Statement was declared effective on June 3, 2011. As of August 31, 2011, the Company raised $40,000 in proceeds with the issuance of 1,333,333 shares of its common stock from this offering. Legal and accounting fees relating to this registration statement and offering were $26,000.

Despite this, we still do not have sufficient resources to effectuate our business plan. As of November 6, 2011 we had approximately $92,718 in cash. As noted above, we expect to incur a minimum of $100,000 in expenses during the next twelve months of operations, assuming that we open our pilot restaurant in the best way possible.

Going Concern Consideration

Our registered independent auditors included an explanatory paragraph in their report on the accompanying consolidated financial statements regarding concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our registered independent auditors.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our principal executive officer and principal financial officer have reviewed the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of the end of the period covered by this report and have concluded that the disclosure controls and procedures are not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner.

Changes in Internal Controls

There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults upon Senior Securities

None.

Item 4. Submission of Mattes to a Vote of Security Holders

There was no matter submitted to a vote of security holders during the fiscal quarter ended September 30, 2011.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit
Number		Description

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

	FELAFEL CORP.

Date: November 10, 2011	By:	/s/ Idan Karako
		Name: Idan Karako Title: President, Chief Executive Officer, Treasurer and Director (Principal Executive Officer and Principal Financial and Accounting Officer)

Date: November 10, 2011		By: /s/ Viktorija Eglinskaite-Dijokiene
		Name: Viktorija Eglinskaite-Dijokiene Title: Secretary and Director

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