Davi Skin 10QSB 2007 Q1 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-QSB

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended: March 31, 2007

[ ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period __________ to __________

	Commission File Number: 001-14297

Davi Skin, Inc.

(Exact name of small business issuer as specified in its charter)

Nevada	86-0907471
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

4223 Glencoe Avenue, Suite B130

Marina Rey, California

(Address of principal executive offices)

310-827-0800

(Issuer’s telephone number)

__________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

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 preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 12,315,820 common shares as of March 31, 2007.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

Table of Contents

	TABLE OF CONTENTS	Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis or Plan of Operation	4
Item 3.	Controls and Procedures	13
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Submission of Matters to a Vote of Security Holders	14
Item 5.	Other Information	14
Item 6.	Exhibits	14

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our unaudited financial statements included in this Form 10-QSB are as follows:
F-1	Balance Sheet as of March 31, 2007;
F-2	Statements of Operations for the three months ended March 31, 2007 and 2006, and for the period from inception (March 21, 2004) through March 31, 2007;
F-3	Statements of Cash Flows for the three months ended March 31, 2007 and 2006, and for the period from inception (March 21, 2004) through March 31, 2007;
F-4	Notes to Financial Statements;

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-QSB. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2007 are not necessarily indicative of the results that can be expected for the full year.

Table of Contents

DAVI SKIN, Inc.
(formerly MW Medical, Inc.)
(A Developmental Stage Company)
BALANCE SHEET
(Unaudited)

	As of
	March 31, 2007
CURRENT ASSETS
Certificates of deposit		255,332
Accounts receivables		38,287
Inventory		669,468
Prepaid expenses		1,998
TOTAL CURRENT ASSETS		965,085

Fixed Assets, net of accumulated depreciation of $5,269		30,421

Deposit		44,505
TOTAL ASSETS		1,040,011

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Bank overdraft		12,971
Accounts payable and accrued expenses		305,190
Notes payable - related parties		286,923
TOTAL CURRENT LIABILITIES		605,084

STOCKHOLDERS' EQUITY

Preferred stock; $.001 par value; 10,000,000 shares
authorized and no shares issued and outstanding		-

Common stock; $.001 par value; 90,000,000 shares
authorized, 12,315,820 shares issued and outstanding		12,316

Additional paid in capital		10,753,285
Accumulated deficit during devemlopmental stage		(8,944,328	)
Net loss		(1,386,346	)
TOTAL STOCKHOLDERS' EQUITY		434,927

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		1,040,011


See Accompanying Notes to Financial Statements

F - 1

Table of Contents

DAVI SKIN, Inc.
(formerly MW Medical, Inc.)
(A Developmental Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)

							From inception
	Three Months Ended						(March 21, 2004)
	March 31						through
	2007			2006			March 31,2007
Sales		27,219			-			50,028
Cost of goods sold		(2,188	)		-			(3,982	)
Gross profit		25,031			-			46,046

Operating Expenses
Selling, general and administrative		325,334			227,870			3,056,329
Depreciation		1,750			5,022			34,002
Consulting fees		155,117			-			1,425,252
Employee Stock Options		702,486			1,898,257			4,764,359
Professional fees		257,823			54,525			928,016
Total Operating Expenses		1,442,510			2,185,674			10,207,958

Loss from operations		(1,417,479	)		(2,185,674	)		(10,161,912	)

Other income (expenses)
Royalty income		27,056			25,000			52,056
Interest income		3,443			7,521			112,768
Interest expense		(6,405	)		(5,000	)		(87,263	)
Other income (expenses)		7,039			3,077			(9,659	)
Loss on disposal of assets		-			-			(38,609	)
Total Other Income		31,133			30,598			29,293

Net Loss		(1,386,346	)		(2,155,076	)		(10,132,619	)

Basic loss per common share		(0.11	)		(0.19	)

Diluted loss per common share		(0.11	)		(0.19	)

Basic and diluted weighted average
common share outstanding		12,226,720			11,568,042


See Accompanying Notes to Financial Statements

F - 2

Table of Contents

DAVI SKIN, Inc
(formerly MW Medical, Inc.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)

							From inception
	Three Months Ended						(March 21, 2004)
	March 31,						through
	2007			2006			March 31, 2007
OPERATING ACTIVITIES
Net Loss		(1,386,346	)		(2,155,076	)		(10,132,619	)
Adjustments to reconcile net loss to
net cash used in operating activities:
Prepaid consulting expense		34,376			11,458			114,584
Stock based compensation & expenses		702,486			1,582,408			5,704,750
Depreciation and amortization		1,750			5,022			34,002
Accrued interest		6,304			5,000			86,923
Loss on sale of fixed assets		-			-			38,609
Non cash consulting fee		30,000			-			79,695

Changes in operating assets and liabilities:
Accounts Receivable		(15,648	)		6,000			(64,670	)
Inventory		9,800			-			(669,469	)
Prepaid expenses		27			5,000			(1,998	)
Deposits		-			(33,000	)		(44,505	)
Contingent liabilities		-			-			26,383
Accounts payable and accrued liabilities		162,354			(21,457	)		305,234
Net cash used in operating activities		(454,897	)		(594,645	)		(4,523,081	)
	��
INVESTING ACTIVITIES
Cash flow from investing activities:
Change in certificates of deposit		579,362			(802,396	)		(255,332	)
Sale of fixed assets		-			-			1,739
Purchase of fixed assets		-			-			(116,187	)
Net cash provided by (used in) investing activities		579,362			(802,396	)		(369,780	)

FINANCING ACTIVITIES
Cash flows from financing activities:
Bank overdraft		(124,465	)		-			12,971
Proceeds from stock transactions		-			1,496,000			4,679,890
Notes payable-related party		-			-			200,000
Net cash provided by (used in) financing activities		(124,465	)		1,496,000			4,892,861


Net change in cash and cash equivalents		-			98,959			-

Cash at beginning of period		-			3,617			-

Cash at end of period		-			102,576			-


See Accompanying Notes to Financial Statements

F - 3

Table of Contents

DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION:

The accompanying unaudited financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for interim financial statements. The interim financial statements present the balance sheet, statement of operations, and cash flows of the Company. The financial statements should be read in conjunction with the Form 10-KSB of the Company for the year ended December 31, 2006. In the opinion of management all normally recurring adjustments necessary to present fairly the financial position as of March 31, 2007 have been included in the financial statements. Interim results are not necessarily indicative of operations for the full year. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Acutual results could differ from those estimates.

Going concern:

The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. The Company has incurred net losses of $1,386,346 for the three month period ended March 31, 2007, and has incurred cumulative net losses of $10,132,619 since its inception and will require additional capital for its operational activities. The Company has successfully developed and established a line of men’s and women’s skin care products. The Company has and is aggressively launching its products with several luxury retailers. While the Company has already invested substantial funds in developing, promoting, and marketing activities, additional funds will be required to continue these efforts to establish market presence and gain market shares. The Company believes that these endeavors will result in increased sales. However, as of March 31, 2007, the Company has insufficient cash to operate its business for the next twelve months. The Company experienced revenues during the current quarter and believes that while revenues will increase, they will not be sufficient to absorb expenses to maintain the Company as a going concern. As such, the Company must raise additional capital to achieve its business goals and to continue operations. The Company’s ability to raise additional capital through the future issuances of the common stock is unknown. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties. The Company currently has positive working capital, but has not established a stabilized source of revenues sufficient to cover operating costs over an extended period of time. Additionally, the Company is involved in litigation with several parties. While the Company is attempting to settle this litigation the outcome may adversely affect the liquidity of the Company and the ability to raise additional funds.

Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses before achieving operating profitability. The Company intends to further position itself so that it may be able to raise additional funds through the capital markets which to date it has demonstrated the ability to do so. Management is currently pursuing several alternatives to raise additional capital. While the management believes it will be successful in raising the necessary funds for its immediate needs, there are no assurances that in the future the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

F - 4

Table of Contents

DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

2. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES

Description of business - Davi Skin, Inc., formerly MW Medical, Inc., (referred to as the “Company”) is involved in the establishment and development of an all natural grape-based skin care line. The Company launched the sale of its products, which are currently being sold in New York, during the year ended December 31, 2006.

History - On June 21, 2004, the Company completed and closed a Plan of Merger and Reorganization Agreement (“Merger Transaction”) with Davi Skin, Inc. (“Davi”), a privately owned company, whereby both parties agreed that a subsidiary of the Company would merge into and with Davi and become a wholly-owned subsidiary of the Company. As consideration for this merger transaction, the Company issued 9,768,327 shares of its common stock in exchange for all the outstanding common stock of Davi on a one-for-one share exchange basis. The Agreement further provided for the Company’s officers and directors were to resign and the board of directors of Davi would become the board of directors for the Company. This transaction has been accounted for as a recapitalization or reverse merger whereby Davi would be considered the accounting acquirer, and the accounting history of the acquirer would be carried forward as the history for the Company and no goodwill would be recorded. Accordingly, the accompanying financial statements reflect the history of Davi from its date incorporation of March 21, 2004 (incorporated in the State of Nevada). Prior to the merger transaction, the Company had 645,033 shares of its common stock outstanding, $1,922 in accounts payable, $200,000 in a note payable to a related party and no assets.

3. SIGNIFICANT ACCOUNTING POLICIES

Development stage company. The accompanying financial statements have been prepared in accordance with the Statement of Financial Accounting Standards No. 7 “Accounting and Reporting by Development-Stage Enterprises”. A development-stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenue there from.

Definition of fiscal year. The Company’s fiscal year end is December 31.

Use of estimates . The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Revenue recognition. Revenues are recognized when services are rendered and/or products are delivered. Costs and expenses are recognized during the period in which they are incurred.

Cash and cash equivalents. We consider all highly liquid short-term investments, with original maturities of three months or less, to be cash equivalents. Such cash equivalents generally are part of our cash management activities rather than part of its operating, investing, and financing activities. Changes in the market value of cash equivalents result in gains or losses that are recognized in the income statement in the period in which they occur.

F - 5

Table of Contents

DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

Receivables. The Company’s accounts receivables represent financial instruments with a potential risk. We offer, and reserve the right to deny, credit terms with credit limits to customers based on their creditworthiness. We retain the right to place approved accounts on credit hold should these accounts become delinquent. We will maintain an allowance for doubtful accounts for estimated losses should customers fail to make required payments. In addition, we monitor the accounts for aging, historical account balances, payment patterns, history of collectibility, and customer creditworthiness when determining the collectibility of bad debt. Accounts receivables are written off when all collection attempts have failed. Allowance for doubtful accounts may increase if circumstances warrant. We believe that our current account receivables are collectible.

Credit and concentration risk. The Company maintains deposit accounts in a single financial institution. From time to time, cash deposits may exceed Federal Deposit Insurance Corporation limits. The Company maintains certificates of deposit in excess of federal deposit insurance limits and, the Company’s general operating account will exceed federal deposit insurance limits.

Inventory. The Company’s inventory consists of finished goods and raw materials, is stated at the lower of cost or market and cost is determined by the first-in, first-out method. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such writedowns establish a new cost basis of accounting for the related inventory. Actual inventory losses may differ from management’s estimates, and such differences could be material to the Company’s financial position, results of operations and cash flows.

Fixed assets. Property and equipment are depreciated over the estimated useful lives of the related assets., generally 3-5 years. Leasehold improvements are amortized over the lesser of the lease term or the estimated life of the asset. Depreciation and amortization is computed on the straight-line method. Repairs and maintenance are expensed as incurred.

Fair value of financial instruments. Statement of Financial Accounting Standards (“SFAS”) No. 107, “Disclosure About Fair Value of Financial Instruments,” requires us to disclose, when reasonably attainable, the fair market values of its assets and liabilities which are deemed to be financial instruments. The carrying amounts and estimated fair values of our financial instruments approximate their fair value due to their short-term nature.

Earnings (loss) per share. Basic earnings (loss) per share exclude any dilutive effects of options, warrants and convertible securities. Basic earnings (loss) per share are computed using the weighted-average number of outstanding common shares during the applicable period. Diluted earnings (loss) per share are computed using the weighted-average number of common and common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive. Stock options are anti-dilutive when the results from operations are a net loss, as is the case for the for the three months ended March 31, 2007 and 2006 or when the exercise price of the options is greater than the average market price of the common stock for the period.

F - 6

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DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

Income taxes. The Company accounts for its income taxes in accordance with Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We established a valuation allowance for the full tax benefit of the operating loss carryforward due to the uncertainty regarding realization. As of March 31, 2007, the Company has cumulative net losses of $10,100,000. The available net operating loss carryforwards are still being determined. Such losses may not be fully deductible due to the significant amounts of non-cash service costs.

Comprehensive income (loss). The Company has no components of other comprehensive income. Accordingly, net loss equals comprehensive loss for all periods.

Advertising costs. Advertising costs incurred in the normal course of operations are expensed as incurred. Advertising costs incurred for the three months ended March 31, 2007 and 2006, and for the period from inception (March 21, 2004) through March 31, 2007 was $8,161, and $0, and $8,161, respectively.

Stock-based compensation - The Company accounts for its stock options under SFAS 123(R).

In order to determine compensation on options issued to consultants, and employees’ options, the fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Company estimates the requisite service period used in the Black-Scholes calculation based on an analysis of vesting and exercisability conditions, explicit, implicit, and/or derived service periods, and the probability of the satisfaction of any performance or service conditions. The Company also considers whether the requisite service has been rendered when recognizing compensation costs. The Company does not consider market conditions to be vesting conditions and an award is not deemed to be forfeited solely because a market condition is not satisfied.

4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 2006, the FASB issued SFAS No. 155 entitled “Accounting for Certain Hybrid Financial Instruments,” an amendment of SFAS No. 133 (“Accounting for Derivative Instruments and Hedging Activities”) and SFAS No. 140 (“Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”). In this context, a hybrid financial instrument refers to certain derivatives embedded in other financial instruments. SFAS No. 155 permits fair value re-measurement of any hybrid financial instrument which contains an embedded derivative that otherwise would require bifurcation under SFAS No. 133. SFAS No. 155 also establishes a requirement to evaluate interests in securitized financial assets in order to identify interests that are either freestanding derivatives or “hybrids” which contain an embedded derivative requiring bifurcation. In addition, SFAS No. 155 clarifies which interest/principal strips are subject to SFAS No. 133, and provides that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS No. 155 amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative. Any difference between the total carrying amount of the components of a bifurcated hybrid financial instrument and the fair value of the combined “hybrid” must be recognized as a cumulative-effect adjustment of beginning deficit/retained earnings.

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DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. Earlier adoption is permitted only as of the beginning of a fiscal year, provided that the entity has not yet issued any annual or interim financial statements for such year. Restatement of prior periods is prohibited.

In March 2006 FASB issued SFAS 156 ‘Accounting for Servicing of Financial Assets’ this Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:

1.	Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract.

2.	Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.

3.	Permits an entity to choose ‘amortization method’ or ‘fair value measurement method’ for each class of separately recognized servicing assets and servicing liabilities.

At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.

5.	Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

This Statement is effective as of the beginning of the Company’s first fiscal year that begins after September 15, 2006.

Management does not believe that SFAS No. 155 and No. 156 will have an impact on our financial statements. Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on our present or future financial statements included elsewhere herein.

5. RELATED PARTY TRANSACTIONS

We owe $200,000 to the former President of our predecessor entity MW Medical, Inc. under a promissory note dated June 15, 2003, and originally due December 31, 2004 bearing an interest rate of 10% per annum. The note is convertible to common shares of the Company at a price of $0.20 or half the market price of the shares at the time of conversion. The maturity date of the note was extended to December 31, 2005 by the note holder and remains unpaid as of March 31, 2007. We have recorded accrued interest in the amount of $86,923.

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Table of Contents

DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

We outsource a portion of our operational activities to companies with greater expertise in certain areas in order to keep our overhead expenditures to a minimum. Currently our payroll function is outsourced to an accounting firm with one of its partners being both a member of our Executive Advisory Board and a relative of a member of our Board of Directors.

6. FIXED ASSETS

Fixed assets consist of the following as of March 31, 2007:

Furniture and fixtures	$	6,972
Computer equipment		11,718
Leasehold improvements		17,000
		35,690
Less: accumulated depreciation		(5,269)
Fixed assets, net	$	30,421

7. DEPOSIT

The Company has booked $44,505 in deposits. The deposit is related to the Company’s prior leasing of office space located at 301 North Canon, Suite 207 Beverly Hills, CA 90292. It is management’s opinion that this amount will be recovered.

8. COMMITMENTS AND CONTINGENCIES

Lease agreements. On May 18, 2006, the Company entered into a 3-year lease agreement with Marina Glencoe, LLC, a California limited liability company, to lease approximately 1,980 square feet of office space located at 4223 Glencoe Ave, Suite B130 Marina Del Rey, CA 90292. The lease provides for monthly rental payments, including parking and utilities of $ 4,643 for the first 12 months, $ 4,775.54 for months 13 - 24 and $4,912.05 for months 24 - 36. The Company provided a letter of credit in the amount of $49,896 as a security deposit.

Future minimum annual lease payments and principal payments under existing agreements are as follows:

12 months ending March 31,
2007	$	57,041
2008		58,672
2009		9,824
Total	$	125,537

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DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

Total rental expenses under non-cancelable lease terms in excess of one year was $13,929, $24,263, and $93,041 for the three month period ended March 31, 2007 and 2006, and the period from inception (March 21, 2004) through March, 31, 2007, respectively.

9. CONCENTRATIONS

The Company’s sales during the three month period ended March 31, 2007 were to one customer and all purchases of inventory were from one supplier.

At March 31, 2007, the Company maintained certificates of deposit at one major financial institution in excess of the federally insured limits pursuant to Federal Deposit Insurance Corporation of $155,332.

10. CAPITAL STOCK TRANSACTIONS

Preferred stock- The authorized preferred stock is 10,000,000 shares at $0.001 par value. As of March 31, 2007 there were no preferred shares issued or outstanding.

Common Stock- The authorized common stock is 90,000,000 shares at $0.001 par value. As of March 31, 2007, there were 12,315,820 shares of common stock outstanding.

11. WARRANTS

On March 27, 2006, we closed a Stock Purchase Agreement (“SPA”) with Artist House Holdings, Inc. (“Artist House.”) Under the Stock Purchase Agreement, Artist House agreed to purchase 283,333 of our Securities Units (“Securities Units,”) consisting of 566,667 shares of common stock and a warrant to purchase an additional 283,333 shares of common stock at $4.50 per share exercisable in 24 months, in exchange for gross proceeds of $1,700,000 (less $204,000 in fees) for net proceeds of $1,496,000, an effective price of $2.65 per share. We filed the Registration Statement, however did not pursue the registration process due to legal proceedings. The warrants issued in accordance with the above mentioned SPA were valued at $275,737 using the Black-Scholes option pricing model. The following table summarizes the assumptions used in arriving at the valuation:

Number of warrants issued		283,333
Market price at grant date	$	1.50
Exercise price	$	4.50
Term		24 months
Volitility		66	%
Annual rate of quarterly dividends		0.00	%
Discount Rate-Bond Equivalent Yield		4.61	%

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DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

12. COMMON STOCK OPTIONS

In order to determine compensation on options issued to consultants, as well as fair value disclosures for employees’ options, the fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Company estimates the requisite service period used in the Black-Scholes calculation based on an analysis of vesting and exercisability conditions, explicit, implicit, and/or derived service periods, and the probability of the satisfaction of any performance or service conditions. The Company also considers whether the requisite service has been rendered when recognizing compensation costs. The Company does not consider market conditions to be vesting conditions and an award is not deemed to be forfeited solely because a market condition is not satisfied.

On November 1, 2005, we entered into an employment agreement (“Agreement”) with our President. The term of the Agreement is for two years with an annual salary of $120,000. The Agreement provides for bonuses to our President based upon our financial performance to be determined at the sole discretion of our Board of Directors after consultation with our President. The Agreement also provides for equity based compensation to purchase up to 1,250,000 shares of our common stock (“Stock Options”) at a purchase price of $0.25 per share. The Stock Options vest as follows: 250,000 shares upon execution of the Agreement; 500,000 shares on March 1, 2006; and 500,000 shares on March 1, 2007. During the three months ended March 31, 2007, the President agreed to forfeit options to purchase 750,000 shares of the Company’s common stock. The estimated fair value of the Stock Options has been determined using Black-Scholes option pricing model using the following assumptions:

exercise price of	$	0.25
closing stock price on date of the Agreement of	$	3.50
historical stock price volatility of		77	%
risk free interest rate of		3.50	%
dividend yield of		0% and 3 year term.

The estimated fair value of the Stock Options was expensed over the vesting period. During the three months ended March 31, 2007, 2006, and during the period from inception (March 21, 2004) through March 31, 2007 we recorded an expense related to the Stock Options of $702,486, $1,582,407, and $4,764,157, respectively.

In February 2006, we employed Patrick Pflipsen and the Company agreed to provide equity based compensation to purchase up to 50,000 shares of our common stock (“Stock Options”) at a purchase price of $0.26 per share. The estimated fair value of the Stock Options has been determined using Black-Scholes option pricing model using the following assumptions:

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DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

exercise price of	$	0.26
closing stock price on date of the Agreement of	$	0.26
historical stock price volatility of		66	%
risk free interest rate of		4.56	%
dividend yield of		0% and 1year term.

The estimated fair value of the Stock Options totaled $6,166, which was expensed over the vesting period. During the three months ended March 31, 2007and 2006, and during the inception period from inception (March 21, 2004) through March 31,2007, we recorded an expense related to the Stock Options of $0, $0, $6,166, respectively.

On June 8, 2006, we entered into an employment agreement (“Agreement”) with our Chief Financial Officer. The term of the Agreement is for two years with an annual salary of $120,000. The Agreement provides for bonuses to our Chief Financial Officer based upon our financial performance to be determined at the sole discretion of our Board of Directors, and quarterly bonuses tied to the accurate and timely filing of all required SEC filings. The Agreement also provides for equity based compensation to purchase up to 370,000 shares of our common stock (“Stock Options”) at a purchase price of $1.00 per share. The Stock Options vest as follows: 10,000 shares upon execution of the Agreement; 30,000 shares at the end of each quarter during the term that the Executive remains employed. This executive resigned on September 15, 2006, and accordingly, the options to purchase 360,000 shares were forfeited during the year ended December 31, 2006. The estimated fair value of the Stock Options has been determined using Black-Scholes option pricing model using the following assumptions:

exercise price of	$	1.00
closing stock price on date of the Agreement of	$	1.01
historical stock price volatility of		107	%
risk free interest rate of		4.99	%
dividend yield of		0% and 3 year term.

The estimated fair value of the Stock Options totaled $8,696, which was expensed over the vesting period. During the three months ended March 31, 2007and 2006, and during the period from inception (March 21, 2004) through March 31, 2007, we recorded an expense related to the Stock Options of $0, $0, $8,696, respectively.

On November 28, 2006, Davi Skin, Inc. (the “Company”) executed and delivered a severance agreement with Patrick Pflipsen (“Pflipsen”) by which the Company terminated Pflipsen’s employment with the Company. In consideration for Pflipsen’s obligations under the agreement, the agreement provides that the Company shall issue 50,000 options to purchase common stock of the Company with an exercise price of $0.50 per share. Under the agreement, the Company also retained the option to engage Pflipsen as a consultant to assist in various projects, including capital raises for the Company. The estimated fair value of the Stock Options has been determined using Black-Scholes option pricing model using the following assumptions:

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DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

exercise price of	$	0.49
closing stock price on date of the Agreement of	$	0.25
historical stock price volatility of		152	%
risk free interest rate of		4.56	%
dividend yield of		0% and 6 mth term.

The estimated fair value of the Stock Options totaled $9,740, which was expensed over the vesting period., During the three months ended March 31, 2007and 2006, and during the period from inception (March 21, 2004) through March 31, 2007, we recorded an expense related to the Stock Options totaling $0, $0, and $9,740 respectively.

The following is a summary of the stock option activity:

	Number of Shares			Weighted Average Exercise Price
Outstanding at January 1, 2007		1,360,000		$	0.26
Options Granted		-		$	-
Options Canceled		(750,000	)	$	(0.25	)
Options Exercised		-		$	-

Outstanding at March 31, 2007		610,000		$	0.26

Exercisable at March 31, 2007		610,000		$	0.26

The details of the vested stock options outstanding as of March 31, 2007 are as follows:

	Options Outstanding						Options Exercisable
Range of Exercisable Prices	Number Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price

$0.25 - $1.00		610,000		1.55	$	0.26		610,000	$	0.26

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DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

	Options Outstanding & Unvested at March 31, 2007
	Number Outstanding			Weighted Average Exercise Price
Non Vested at January 1, 2007		500,000		$	0.25
Granted		-		$	-
Forfeited		-		$	-
Vested		(500,000	)	$	0.25

Non Vested at March 31, 2007		-		$	-

13. EQUITY SECURITIES OFFERINGS

On January 3, 2007, the Company entered into an agreement with Donald B. Schwall, Jr. (“Mr. Schwall”). Pursuant to the agreement, Mr. Schwall is obligated to act as a consultant and advisor to the Company on various promotional and marketing campaigns, including developing online promotional concepts, events and materials to increase website awareness, service membership, and eCommerce product sales. Mr. Schwall will also provide consulting services relating to endorsements, co-operative promotions, and other forms of strategic alliances. The agreement provides that the Company shall compensate Mr. Schwall for his services with 400,000 shares of Company common stock issued under the Company’s stock compensation plan as follows: 200,000 shares upon execution of the Agreement, and 200,000 shares on April 1, 2007 so long as the agreement is in effect on such date. The agreement shall terminate on January 3, 2008.

The Company filed a Registration Statement on Form S-8 relating to 200,000 shares of its common stock, par value $0.001 per share (the “Common Stock”) issued to Donald B. Schwall, Jr. (“Consultant”), an eligible consultant to the Corporation under that certain Consulting Agreement between the Company and Consultant dated as of January 3, 2007. Subsequent to March 31, 2007, the consulting agreement was cancelled and 150,000 shares of common stock were returned. During the three month period ended March 31, 2007, non cash consulting fees of $30,000 were recorded relating to this agreement.

14. LEGAL PROCEEDINGS

An action entitled Rowe D. Nelson, et al. vs. Davi Skin, Inc., et al., Los Angeles Superior Court Case No. SC091146 (the “Complaint”) was filed on September 20, 2006. The plaintiffs filed an amended complaint on or about October 6, 2006, to which the defendants filed a demurrer, which was sustained in part. The plaintiffs filed a second amended complaint ("SAC") on or about February 23, 2007, and defendants have demurred in part to that pleading. The demurrer is pending. The Complaint makes a number of allegations, principally that (a) certain individual members of the Mondavi family, including our Chairman,

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DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

Carlo Mondavi, made intentional misrepresentations or fraudulent omissions about the physical and financial involvement of the Mondavi family in the Company, the enforceability of certain agreements between the Company and Opus One and the Robert Mondavi Corporation, and the acquisition of the Robert Mondavi Corporation by Constellation Brands, to induce the plaintiffs to invest in the Company, (b) certain individual members of the Mondavi family, including our Chairman, Carlo Mondavi, made intentional misrepresentations to induce plaintiff Sam Medley and his son and business associate (the “Medleys”) to merge MW Medical, Inc., a company the Medleys allegedly contracted to buy, into Davi Skin, Inc., at the time a privately held company, and (c) Carlo Mondavi, our Chairman and a director, Joe Spellman, our President and CEO and a director, and Josh LeVine, an executive vice president and director, misused corporate assets for their personal benefit by voting to increase their own salaries, issuing themselves stock options and approving large expense reimbursements. Based on these factual allegations, the Complaint states fifteen (15) causes of action against some or all of the named defendants, including, among others, breach of fiduciary duty of loyalty, breach of fiduciary duty of care, unjust enrichment, conversion, waste of corporate assets, fraudulent misrepresentation, fraud in the inducement, state law securities fraud, intentional interference with contract and promissory estoppel. We do not believe that the claims are meritorious and dispute the underlying facts alleged. We intend to defend the matter vigorously.

On May 4, 2006 we received a letter from legal counsel representing Artist House in which Artist House purportedly terminated the SPA dated March 27, 2006, and demanded the unconditional return of $1,700,000 million, representing Artist House’s purchase price under the SPA for 566,667 shares of our common stock plus warrants exercisable into 283,333 shares of our common stock. In this demand letter, Artist House alleged that we failed to timely perform certain conditions and obligations under the SPA, including (a) appointing certain individuals affiliated with Artist House to our board of directors, (b) obtaining directors and officers liability insurance, (c) modifying rights related to stock options issued to our CEO, Joe Spellman, (d) appointing Artist House as our licensing agent in Japan, and (e) requiring board approval for any salary increases to our officers. On July 6, 2006, counsel for the Company received written notice from another attorney representing Artist House, demanding rescission of the SPA, based on the similar claims and allegations of breach and non-performance by the Company and allegations that the alleged “finder” of the investment was acting as an unlicensed broker and therefore the transaction is subject to rescission. The Company denies the allegations.

On or about August 2, 2006, a lawsuit entitled Artist House Holdings, Inc. vs Davi Skin, Inc. et. al., United States District Court, District of Nevada, Case No. 2:06-CV-893-RLH-LRL, was filed in federal district court in Nevada against the Company, its directors, and other individuals. The plaintiff, Artist House Holdings, Inc., is a shareholder in the Company. The complaint alleged violations of federal securities law and Nevada securities law, breach of contract, and related claims arising from the plaintiff's investment in Company. A First Amended Complaint was filed on July 31, 2006, and a Second Amended Complaint on January 8, 2007. On December 22, 2006, the plaintiffs filed an emergency motion for a preliminary injunction, which the District Court denied on January 12, 2007. On January 26, 2007, the Company and its directors filed a motion to dismiss the federal securities law claim. That motion was granted on March 27, 2007. The Court gave the plaintiff leave to amend, and plaintiff subsequently filed an amended complaint to restate the claims not dismissed and to add a party defendant. We filed an answer to the amended complaint on May 17, 2007. We intend to defend the matter vigorously.

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DAVI SKIN, INC

(Formerly MW Medical, Inc.)

A Development Stage Company

March 31, 2007

NOTES TO FINANCIAL STATEMENTS

During April, 2006, we received a letter from a third party requesting the exercise of a conversion right attached to a $200,000 note originally due to Ms. Jan Wallace, the former CEO of MW Medical. The company is in negotiations presently with Ms. Wallace to convert the note from debt to equity. At the year end, the note was still a debt on the books of the company accruing interest. Since then, the debt has been converted to equity in the names of third party holders.

The financial statements do not reflect any adjustments that could result from an unfavorable outcome with respect to any of the above legal proceedings. At this juncture we cannot determine the outcome nor range of any such loss. We do believe, however, that the above litigation is without merit, and are currently evaluating strategic and legal options best suited for our future growth.

15. SUBSEQUENT EVENTS

On April 23, 2007, the Company retained Crescent Fund, LLC to provide consulting services relating to endorsements, co-operative promotions, and other forms of strategic alliances. The agreement provides that the Company shall compensate Crescent for their services with 400,000 shares of Company common stock issued under the Company’s stock compensation plan.

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Item 2. Management’s Discussion and Analysis or Plan of Operation

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

We are principally engaged in the development, manufacturing and distribution of luxury branded skincare products for men and women that encompass the anti-oxidant rich by-products of the winemaking process coupled with the latest innovations in modern technology. We also function as a licensing agent to entities interested in associating their products with our luxury brand names. The development of the luxury branded skincare product line and its related packaging is now complete. We are now selling the initial nine (9) SKUs, four (4) products in the women’s line and five (5) products in the men’s line, which are described in more detail below. All the products are now available pursuant to our retail launch in October 2006 with luxury retailer Bergdorf Goodman in New York City. Since the launch, the products are now available at Bergdorf Goodman and through their website; Bliss World Catalogs, and their corresponding website; and the luxury hotel and spa, Meadow Wood, located in the Napa Valley. These select upscale retailers submit purchase orders for quantities of our branded products, which we fulfill from our distribution center.

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Skin Care Products

The initial nine (9) SKUs include four (4) products for women and five (5) for men described in detail below.

Women’s Line:

§	Le Grand Cru for Women — An ultra-luxurious cream designed for women to provide a unique, long lasting, slow released infusion of anti-oxidants and moisture to the skin in order to make it smoother, softer and more supple;

§	Vine Fresh SPF 30 Lotion — Oil free everyday moisturizer with UVB/UVA protection of a SPF 30. Formulated as a light, non-greasy formula, which is perfect for any type skin to moisturize and protect against oxidative damage such as pollution and stress;

§	Moscato Purifying Cleanser — A gentle, luxurious creamy product designed to cleanse and condition at the same time;

§	Harvest Mist Toner — A super hydrating mist, formulated to tone, hydrate and refresh dull complexion.

Men’s Line:

§	Le Grand Cru for Men — An ultra-luxurious cream designed for men to provide a unique, long lasting, slow released infusion of anti-oxidants and moisture to the skin in order to make it smoother, softer and more supple;

§	Vine Fresh SPF 15 Lotion — Oil free everyday moisturizer with UVB/UVA protection of a SPF 15. Formulated as a light, non-greasy formula, which is perfect for any type skin to moisturize and protect against oxidative damage such as pollution and stress;

§	Reserve Shave Cream — A luxurious shave cream designed to provide an extraordinarily close yet comfortable shave;

§	Coastal Vine After Shave — An aftershave elixir /tonic used to soothe freshly shaved skin, reduce irritation and provide moisturizing properties;

§	Crushed Grape Seed Exfoliating Cleanser —Infused with crushed grape seeds this product is designed to cleanse, exfoliate and condition at the same time.

At the core of all our products is a proprietary microencapsulated anti-aging antioxidant complex called Meritage that was created in collaboration with laboratories in Lyon, France. Meritage is a blend of grape and fermented wine extracts, green tea, raspberry, blackcurrant, and bilberry extracts amongst other select key ingredients. The Meritage complex is created through a unique double fermentation process, which allows for the select high-level antioxidants to remain active on the skin longer than conventionally created products.

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Licensing Agent

In order to further our success and to leverage our Board Chairman’s highly visible and well-respected Mondavi name into other market categories, we entered into an agreement with Constellation Brands Group (“CBG”), the parent entity of The Robert Mondavi Corporation (“RMC”). RMC has retained us to act as their licensing agent in agreements with Waterford Wedgewood USA, Inc. (“Waterford”) on the development of a Robert Mondavi stemware line. CBG owns certain intellectual property rights held in RMC, including the valued Robert-Mondavi licensed marks (the “Intellectual Property”), and we have been engaged to: (1) negotiate opportunities with Waterford to license the Intellectual Property with Waterford’s stemware products, (2) develop and implement strategic plans for branding Waterford’s products, and (3) facilitate the terms and conditions of any agreements with Waterford. In exchange, CBG has agreed to compensate us with a revenue share of thirty three and one-third percent (33 -1/3%) of the gross revenues collected in any agreement we establish with Waterford. Gross revenues means the gross receipts actually received from any agreement with Waterford, including without limitation advance payments, minimum guarantees, royalty payments and other license fees.

We received a one-time $25,000 signing bonus during the year ended December 31, 2006 for the successful negotiation and execution of the Constellation licensing arrangement. Subsequent to this reporting period, we have begun to receive royalty payments per the terms set forth in the agreement.

Plan of Operation in the Next Twelve Months

Skin Care Line

We completed the research and development of our initial line of luxury branded skincare products for men and women that harness the substantial antioxidant powers of fermented grape extracts. Production of the initial nine (9) SKUs commenced with our contract manufacturer last September ahead of our October 2006 retail launch with Bergdorf Goodman.

The initial nine (9) SKUs include four (4) products for women and five (5) for men. All the products are now available pursuant to our retail launch in October 2006 with luxury retailer Bergdorf Goodman in New York City. Since the launch, the products are now available at Bergdorf Goodman, and through their website; Bliss World Catalogs, and their corresponding website; and the luxury hotel and spa, Meadow Wood, located in the Napa Valley. These select upscale retailers submit purchase orders for quantities of our branded products, which we fulfill from our distribution center. We intend to continue our plan to position our products in this market.

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Manufacturer

Prior to our product launch in October 2006, we completed the research and development necessary to finalize the product designs and technical aspects needed to commence production of our products with our contract manufacturer. We completed the process of choosing all peripheral items involved in the manufacturing and marketing process, including:

§	the final shape and size of the product containers;

§	the final selection of caps;

§	the final packaging design;

§	the logo and label designs; and

§	final unit carton design and construction

Upon final selection of the packaging directions and the completion of technical drawings of the packaging itself, production of our initial nine (9) SKUs commenced. Upon the completion of production, finished goods were then shipped to our distribution warehouse to await distribution to our retail channels. We intend to continue working with our contact manufacturer to ensure that our product orders are responsive to the needs of our customers.

Distribution / Expansion

We are in the process of exploring the expansion of our retail distribution. Our current plan is to begin supplying upscale retailers with our products in several select cities in the United States including Los Angeles as well as to expand overseas beginning with Europe and ultimately into Asia.

Luxury Branding and Acquisitions

During the normal course of business, our management team has been searching for other business opportunities that would allow us to diversify our sources of revenue.

In order to accomplish this new portion of our business plan, our board of directors will focus more on becoming a luxury brands headquarters. It is our intent to leverage our Chairman of the Board’s highly visible and well-respected Mondavi name into other market categories as well as to acquire new brands and intellectual properties to own, develop and license in the luxury category, while continuing to develop our original luxury skin care products.

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It is our intent that our company will become a holding company that will maintain the intellectual properties, trademarks, copyrights and licenses of the various operating businesses we are able to acquire or partner with. We plan to own anywhere from 0% to 100% of these operational companies. Depending on the circumstances surrounding each opportunity, management anticipates it will choose to fund these operational companies or enter into a joint venture with them. The holding company will generate revenues from all licenses it issues to use the Mondavi and Davi names.

As our first step to further our new objective, we entered into an agreement with Constellation Brands Group (“CBG”), the parent entity of The Robert Mondavi Corporation (“RMC”). RMC has retained us to act as their licensing agent in agreements with Waterford Wedgewood USA, Inc. (“Waterford”) on the development of a Robert Mondavi stemware line. CBG owns certain intellectual property rights held in RMC, including the valued Robert-Mondavi licensed marks (the “Intellectual Property”), and we have been engaged to (1) negotiate opportunities with Waterford to license the Intellectual Property with Waterford’s stemware products, (2) develop and implement strategic plans for branding Waterford’s products, and (3) facilitate the terms and conditions of any agreements with Waterford. In exchange, CBG has agreed to compensate us with a revenue share of thirty three and one-third percent (33 - 1/3%) of the gross revenues collected in any agreement we establish with Waterford. Gross revenues means the gross receipts actually received from any agreement with Waterford, including without limitation advance payments, minimum guarantees, royalty payments and other license fees.

On February 7, 2006, we successfully established the first license agreement (the “License Agreement”) with Waterford. RMC granted to Waterford the exclusive right to use the Intellectual Property in connection with the manufacture and worldwide distribution of Waterford’s stemware, barware, decanters, and other related products (the “Licensed Products”). Pursuant to the terms of the License Agreement, we have been retained to facilitate promotional efforts of the Licensed Products. Specifically, we have been retained to provide Waterford the services of Carlo Mondavi, our Chairman and Founder, to act as spokesman for the Licensed Products and to make personal appearances at scheduled promotional events. In exchange, Waterford agreed to provide percentage royalties to RMC on net sales of the Licensed Products. Since we negotiated the terms and conditions of the License Agreement with Waterford and will provide promotional services to Waterford, we will share thirty three and one-third percent (33 -1/3%) in any proceeds received from the License Agreement.

Results of Operations for the three months ended March 31, 2007 and 2006

Our total assets as of March 31, 2007 were $1,040,011. Our assets largely consist of certificates of deposit in the amount of $255,332 and inventory in the amount of $669,468. Our total assets as of March 31, 2006, were $2,897,554, consisting primarily of cash in the amount of $102,576 and a certificate of deposit in the amount of $2,705,352. The decrease in cash and investments, our primary assets, is attributable to our administrative costs as the Company has been promoting and developing its product lines, which were launched in October 2006.

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Our total liabilities as of March 31, 2007 were $605,084 compared to $281,343 as of March 31, 2006. Our liabilities consisted primarily of (i) accounts payable in the amount of $305,190, and (ii) $286,923 in a note payable, including $86,923 in accrued interest, to a related party.

Sales. Sales consists of revenues from the sale of products from our skin care line. We reported sales of $27,219 for the three month period ended March 31, 2007, compared with sales of $0 for the same period ended March 31, 2006. This increase is a result of the skin care line launch in October 2006. Our cost of goods sold for the three months ended March 31, 2007 was $2,188 for gross profits of $25,031 for quarter sales.

Operating Expenses. We incurred operating expenses in the amount of $1,442,510 for the three months ended March 31, 2007, compared to opearting expenses of $2,185,674 for the same reporting period in the prior year. The decrease in expenses was largely caused by a decrease in stock based compensation paid to our executive officers. Our operating expenses for the three months ended March 31, 2007 consisted of selling, general and administrative expenses of $325,334, depreciation of $1,750, consulting fees of $155,117, employee stock options of $702,486, and professional fees of $257,823. In comparison, our operating expenses for the three months ended March 31, 2006 consisted of selling, general and administrative expenses of $227,870, depreciation of $5,022, employee stock options of $1,898,257, and professional fees of $54,525.

Other Income. We reported other income of $31,133 for the three months ended March 31, 2007 and other income of $30,598 for the three months ended March 31, 2006. Other income during the three months ended March 31, 2007 and 2006 consisted of royalty income in connection with our licensing agent agreement, interest income and other income.

Net Loss. We reported a net loss of $1,386,346 or $0.11 per share for the three months ended March 31, 2007 compared to a net loss of $2,155,076 or $0.19 per share for the three months ended March 31, 2006.

Liquidity and Capital Resources

As of March 31, 2007, our total current assets of $965,085 consisted of $255,332 of certificates of deposit, $669,468 of inventory, $38,287 of accounts receivable, and $1,998 of prepaid expenses. As of March 31, 2006, our total current assets of $2,809,953, consisted of $102,576 of cash, $2,705,352 of certificates of deposit, and $2,025 of prepaid expenses. In addition, we had working capital of $360,001 and $2,528,610 at March 31, 2007 and 2006, respectively.

We anticipate that we will be dependent, for the short future, upon additional investment capital to fund operating expenses.

Cash Flows from Operating Activities

Net cash used in operating activities was $454,897 for the three months ended March 31, 2007 compared to net cash used in operating activities of $594,645 for the three months ended March 31, 2006.

Cash Flows from Investing Activities

Net cash flow provided by investing activities amounted to $579,362 for the three months ended March 31, 2007 compared to net cash used in investing activities of $802,396 for the three months ended March 31, 2006.

Cash Flows from Financing Activities

Net cash flow used in financing activities amounted to $124,465 for the three month period ended March 31, 2007, compared to net cash provided by financing activities of $1,496,000 for the three month period ended March 31, 2006.

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Off Balance Sheet Arrangements

As of March 31, 2007, there were no off balance sheet arrangements.

Going Concern

Critical Accounting Policies

A “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that the following accounting policies fit this definition:

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Revenue recognition. The Company recognizes revenues when services are rendered and/or products are delivered. Costs and expenses are recognized during the period in which they are incurred.

Stock-based compensation. The Company accounts for its stock options under SFAS 123(R).

Recently Issued Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155 entitled “Accounting for Certain Hybrid Financial Instruments,” an amendment of SFAS No. 133 (“Accounting for Derivative

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Instruments and Hedging Activities”) and SFAS No. 140 (“Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”). In this context, a hybrid financial instrument refers to certain derivatives embedded in other financial instruments. SFAS No. 155 permits fair value re-measurement of any hybrid financial instrument which contains an embedded derivative that otherwise would require bifurcation under SFAS No. 133. SFAS No. 155 also establishes a requirement to evaluate interests in securitized financial assets in order to identify interests that are either freestanding derivatives or “hybrids” which contain an embedded derivative requiring bifurcation. In addition, SFAS No. 155 clarifies which interest/principal strips are subject to SFAS No. 133, and provides that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS No. 155 amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative. When SFAS No. 155 is adopted, any difference between the total carrying amount of the components of a bifurcated hybrid financial instrument and the fair value of the combined “hybrid” must be recognized as a cumulative-effect adjustment of beginning deficit/retained earnings.

1.	Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract.

2.	Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.

3.	Permits an entity to choose ‘amortization method’ or ‘fair value measurement method’ for each class of separately recognized servicing assets and servicing liabilities.

5.	Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

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This Statement is effective as of the beginning of the Company’s first fiscal year that begins after September 15, 2006.

Management does not believe that SFAS No. 155 and No. 156 will have an impact on our consolidated financial statements. Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on our present or future consolidated financial statements included elsewhere herein.

Item 3. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2007. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Mr. Joseph Spellman, and Chief Financial Officer, Mr. Munjit Johal. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2007, our disclosure controls and procedures are effective. There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2007.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that

breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material developments in the ongoing legal proceedings previously reported in which we are a party. A complete discussion of our ongoing legal proceedings is discussed in our annual report on Form 10-KSB for the year ended December 31, 2006.

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

Item 3. Defaults upon Senior Securities

None

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

No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended March 31, 2007.

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Davi Skin, Inc.

Date:	May 15, 2007

	By: /s/ Joseph Spellman Joseph Spellman Title: Chief Executive Officer and Director

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Davi Skin Inactive 10QSB2007 Q1 Quarterly report (small business)