UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
|X| Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended: June 30, 2005
or
|_| Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to
COMMISSION FILE NUMBER: 000-23039
ORALABS HOLDING CORP.
(Exact name of small business issuer as specified in its charter)
Colorado 14-1623047
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18685 East Plaza Drive, Parker, Colorado 80134
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(303) 783-9499
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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.
|X| Yes |_| No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 after the
distribution of securities under a plan confirmed by a court.
|_| Yes |_| No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 2005 Issuer had 4,693,015 shares of common stock, $.001 Par
Value, outstanding.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE)
Yes |_| |X| No
EXPLANATORY NOTE: The only change in this amendment is to the text of the
section entitled "Evaluation of Disclosure Controls and Procedures" in Item 3.
Except as otherwise expressly stated by reference to a specific later date, the
disclosure in this Form 10-QSB/A has not been updated to reflect events
occurring after the original filing or to modify or update those disclosures
affected by subsequent events. Accordingly, except as otherwise expressly
stated, this Form 10-QSB/A continues to describe conditions as of the date of
the original filing, and we have not updated the disclosures contained herein to
reflect events that occurred at a later date. Updated certifications of our
Chief Executive Officer and our Chief Financial Officer are attached to this
Form 10-QSB/A as exhibits.
Table of Contents
Part I. Financial Information
Item 1. Financial Statements Page
------ -------------------- ----
Consolidated Balance Sheets as of June 30, 2005(Unaudited)
And December 31, 2004.............................................. 2
Consolidated Statements of Operations Three Months and Six Months
Ended June 30, 2005 and 2004 (Unaudited)........................... 3
Consolidated Statement of Stockholders' Equity from
December 31, 2004 Through June 30,2005 (Unaudited)................. 4
Consolidated Statements of Cash Flows, Six Months Ended
June 30, 2005 and 2004 (Unaudited)................................. 5
Notes to Consolidated Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial Conditions
And Results of Operations.................................... 7
Item 3. Controls and Procedures....................................... 10
Part II. Other Information .............................................. 11
Exhibit Index................................................................ 14
ORALABS HOLDING CORP AND SUBSIDIARIES
Consolidated Balance Sheets
---------------------------
June 30,
2005 December 31,
Unaudited 2004
------------ ----------
Assets
Current Assets
Cash and cash equivalents $1,071,137 $ 866,432
Accounts receivable, net of allowance for doubtful accounts of
$204,799 (2005)and $345,177 (2004) 814,346 1,275,820
Inventories 3,187,344 2,878,755
Deferred tax asset - current 285,117 285,117
Income taxes receivable 194,081 329,648
Prepaid expenses 164,944 264,451
Deposits and other assets 70,931 158,720
---------- ----------
Total current assets 5,787,900 6,058,943
Non-current assets
Deferred tax asset, long-term 54,084 45,336
Property and equipment, net 1,812,183 1,668,675
---------- ----------
Total non-current assets 1,866,267 1,714,011
Total Assets $7,654,167 $7,772,954
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable - trade $ 817,049 $ 850,157
Accrued liabilities 133,664 131,812
Reserve for returns 251,895 362,342
Income tax payable 0 0
Current portion of long-term debt 8,437 12,581
---------- ----------
Total current liabilities 1,211,045 1,356,892
---------- ----------
Non-current Liabilities
Long-term debt, less current portion 8,925 12,075
---------- ----------
Total non-current liabilities 8,925 12,075
---------- ----------
Commitments and contingencies
Stockholders' equity
Preferred stock, $.001 par value, 1,000,000 shares authorized; none
issued and outstanding 0 0
Common stock, $.001 par value; 25,000,000 shares authorized,
4,693,015 issued (2005 and 2004), 4,693,015 (2005) and
4,580,615 (2004) outstanding 4,693 4,669
Additional paid-in capital 1,511,820 1,463,044
Retained earnings 4,917,684 4,936,274
---------- ----------
Total stockholders' equity 6,434,197 6,403,987
---------- ----------
Total liabilities and stockholders' equity $7,654,167 $7,772,954
========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
ORALABS HOLDING CORP AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 2005 and June 30, 2004
Unaudited
---------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
06/30/05 06/30/04 06/30/05 06/30/04
---------------------------------------------------------------------------------------------------------------------
Revenues:
Product sales $2,543,188 $3,010,480 $6,124,024 $6,790,656
---------- ---------- ---------- ----------
Total Revenues 2,543,188 3,010,480 6,124,024 6,790,656
---------- ---------- ---------- ----------
Cost of Sales 1,597,957 2,180,662 3,978,471 4,794,109
---------- ---------- ---------- ----------
Gross profit 945,231 829,818 2,145,553 1,996,547
---------- ---------- ---------- ----------
Operating Expenses:
Engineering 34,838 81,495 127,709 182,976
Selling and marketing costs 244,949 297,801 656,411 700,935
General and administrative 693,107 762,265 1,403,122 1,477,018
Other 5,554 10,446 25,907 27,937
---------- ---------- ---------- ----------
Total operating expenses 978,448 1,152,007 2,213,149 2,388,866
---------- ---------- ---------- ----------
Net operating (loss) income (33,217) (322,189) (67,596) (392,319)
Other income (expense)
Interest and other income 28,908 2,586 40,258 5,028
---------- ---------- ---------- ----------
Total other income (expense) 28,908 2,586 40,258 5,028
---------- ---------- ---------- ----------
Net (loss) income before provision for income taxes (4,309) (319,603) (27,338) (387,291)
Income tax benefit (expense) 1,383 119,038 8,748 144,179
---------- ---------- ---------- ----------
Net (loss) income $ (2,926) $ (200,565) $ (18,590) $ (243,112)
========== ========== ========== ==========
Basic and diluted (loss) income per common share $ (.00) $ (.04) $ (.00) $ (.05)
========== ========== ========== ==========
Weighted average shares outstanding 4,669,688 4,580,615 4,669,154 4,580,615
========== ========== ========== ==========
---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
ORALABS HOLDING CORP AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the Six Months Ended June 30, 2005
Unaudited
-----------------------------------------------------------------------------------------------------------------------
Preferred Stock Common Stock Addl. Paid-In Retained Total
Shares Amount Shares Amount Capital Earnings
-----------------------------------------------------------------------------------------------------------------------
Balance at Dec. 31, 2004 4,668,615 $4,669 $1,463,044 $4,936,274 $6,403,987
Stock options exercised 24,400 24 48,776 48,800
Net loss (18,590) (18,590)
----------------------------------------------------------------------------------------
Balance at June 30, 2005 4,693,015 $4,693 $1,511,820 $4,917,684 $6,434,197
=======================================================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
ORALABS HOLDING CORP AND SUBSIDIARIES
Consolidated Statements of
Cash Flow For the Six Months
Ended June 30, 2005 and 2004
Unaudited
---------------------------------------------------------------------------------------------------------------
2005 2004
---- ----
---------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
------------------------------------
Net loss $ (18,591) $ (243,112)
----------- -----------
Adjustments to reconcile net loss to net cash provided by operating
activities
Depreciation 275,958 163,730
Allowance for doubtful accounts (140,379) 81,068
Deferred tax asset (8,748) (144,179)
Changes in assets and liabilities:
Accounts receivable - trade 601,853 157,249
Inventories (308,589) (222,535)
Prepaid expenses and deposits 187,296 (37,987)
Accounts payable - trade (33,108) (328,738)
Accrued Liabilities 1,852 39,557
Reserve for returns (110,446) (38,234)
Income taxes receivable (payable) 135,567
----------- -----------
601,256 (330,069)
----------- -----------
Net cash provided by (used in) operating activities 582,665 (573,181)
----------- -----------
Cash from investing activities
Investment in property and equipment (419,466) (471,764)
----------- -----------
Net cash used in investing activities (419,466) (471,764)
----------- -----------
Cash from financing activities
Payment on long-term debt (7,294) (11,436)
Stock options exercised 48,800
----------- -----------
Net cash provided by (used in) financing activities 41,506 (11,436)
----------- -----------
Net increase (decrease) in cash and cash equivalents 204,705 (1,056,381)
Cash and cash equivalents, beginning of the period 866,432 2,561,108
----------- -----------
Cash and cash equivalents, end of the period $ 1,071,137 $ 1,504,727
=========== ===========
Cash paid for income taxes was $ 0.00 (2005) and $ 0.00 (2004)
---------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
ORALABS HOLDING CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. This report should, therefore, be read in
conjunction with the Annual Report on Form 10-KSB/A for the year ended December
31, 2004 (the "2004 Form 10-KSB/A") of OraLabs Holding Corp. and Subsidiaries
(the "Company").
The information included in this report is unaudited but reflects all
adjustments which, in the opinion of management, are necessary to a fair
statement of the results of the interim periods covered thereby. All adjustments
are of a normal and recurring nature except as described herein.
RECLASSIFICATIONS
Certain amounts in the prior period financial statements have been reclassified
to conform to the 2005 presentation.
NOTE 2 - PROPERTY AND EQUIPMENT PROPERTY AND EQUIPMENT CONSISTED OF THE
following:
Property and Equipment:
-----------------------
============================================================================
June 30, 2005
----------------------------------------------------------------------------
Machinery and equipment $3,478,642
Construction in progress 103,846
Leasehold improvements 142,832
------------
3,723,320
Less accumulated depreciation (1,913,137)
------------
$1,812,183
============
NOTE 3 - LINE-OF-CREDIT
The Company has a $2,000,000 line-of-credit agreement with a bank secured by
substantially all of the Company's assets. The line of credit expires September
2005. As of June 30, 2005, the Company had no outstanding balance on this
line-of-credit.
NOTE 4 - RESERVE FOR RETURNS AND ALLOWANCES
The company previously had reserved 2.75% of revenues for returns and allowances
of their product. The reserve is recorded as a reduction of revenues and as a
liability on the balance sheet. Beginning with the quarter ended June 30, 2005,
after an analysis of favorable historical trends, the Company has determined the
reserve needs to be lowered to 1.82%. The amount recorded as a liability on the
balance sheet at June 30, 2005 is $251,895.
NOTE 5 - STOCK OPTIONS
The Company has determined the value of stock-based compensation arrangements
under the provisions of APB Opinion No. 25 "Accounting for Stock Issued to
Employees"; and will make pro forma disclosures required under SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 permits the use of
either a fair value based method or the method defined in APB No. 25 which
requires the disclosure of pro forma net income (loss) and earnings per share
that would have resulted from the use of the fair value based method.
June 30,
2005 2004
------------ ------------
Net (loss) available to common shareholders-
as reported $ (18,590) $ (243,112)
Total stock-based employee compensation expense
determined under fair market value method for
an award (98,931) (7,581)
------------ ------------
Net loss available to common shareholders-
pro forma $ (117,521) $ (250,693)
Basic and diluted loss per common share-
as reported $ 0.00 $ (0.05)
Basic and diluted loss per common share-
pro forma $ (0.03) $ (0.05)
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. All options are granted at fair market value
on the date of the grant. No options have been re-priced or had their maturities
extended during 2005. In terms of the provisions of our 1997 Stock Plan,
employees, with vested options, who leave the employment of the Company, are
required to exercise or forfeit their options within 90 days after leaving
employment regardless of the exercise period of the initial grant.
The following are the weighted-average assumptions used at June 30, 2005 and
2004 for all Black-Scholes calculations in the financial statements:
6
June 30,
2005 2004
-------- --------
Approximate risk free rate 3.74% 4%
Average expected life 5 years 5 years
Dividend yield 0% 0%
Volatility 81% 73%
ORALABS HOLDING CORP AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended, provide a safe harbor for certain
forward-looking statements. This quarterly report contains statements that are
forward-looking. Forward looking statements include those which are not
historical facts, including without limitation statements about management's
expectations for any period beyond the fiscal quarter ended June 30, 2005. Words
such as "expect", "anticipate", "believe", "intend" and "estimate" and similar
expressions are examples of words which identify forward looking statements.
While these statements reflect the Company's beliefs as of the date of this
report, they are subject to assumptions, uncertainties and risks that could
cause actual results to differ materially and adversely from the results
contemplated, forecast or estimated in the forward-looking statements included
in this report. These factors include, but are not necessarily limited to, the
impact of competitive products, the acceptance of new products or product lines
in the marketplace, the Company's ability to manage growth, the availability of
an adequate work force, changes in market conditions, and whether the Company
closes the transaction with NVC Lighting Investment Holdings Limited, ("NVC")
described in Part II, Item 5 below.
Results of Operations. For the three month period ending June 30, 2005 as
compared with the three month period ending June 30, 2004.
Product sales decreased $467,292 or 16%. This decrease in revenue was primarily
a result of a drop off in sales due to increased competition and slower sales at
the retail level. The Company believes that the second half of the year will
bring a higher level of sales due to the seasonality of our primary product
line. The Company believes that it is now in a position to fill a higher level
of orders, should they occur. The Company cannot be sure that any increased
level of sales will occur.
Gross profit increased $115,413. As a percentage of sales, gross profit
increased 10%. A greater concentration of sales were to higher margin customers,
thereby reducing the cost of materials as a percentage of sales. The increase in
gross profit is also, but to a lesser extent, due to decreased costs of labor
and overhead and costs of materials. The Company's capital investment in
automation made a positive impact on labor costs during second quarter of 2005.
The Company experienced increased cost of overhead associated with the move into
its new facility in the second quarter of 2004 which significantly explains the
relatively smaller amount of overhead costs in second quarter 2005. The Company
anticipates continued improvements in costs of operations and is hopeful that
gross profit will continue to make small incremental improvement.
Engineering costs decreased by $46,657 due to an increased amount of engineering
salaries being capitalized in 2005 towards production automation projects.
Selling and marketing decreased by $52,852 due to a decrease in bad debt
expense. Bad debt write-offs in June 2004 as well as an adjustment to the
accrual in June 2005 resulted in the decrease. These costs should remain stable
going forward.
Administrative expenses decreased $69,158 due to a decrease in legal expenses,
moving expense and outside labor. The Company expects these costs to remain
consistent, except for any increase in professional fees and expenses related to
the contemplated transactions with NVC, which the Company estimates to be
$210,000.
Other expense consisting of stock transfer fees decreased $4,892, remaining
consistent from 2004 to 2005. Other expenses are expected to remain consistent
going forward.
The Company incurred a net loss for second quarter 2004 of $200,565, and a net
loss for second quarter 2005 of $2,926, as explained by the above activities. As
a percentage of sales, the net operating loss for the second quarter of 2004 was
7%, while the second quarter of 2005 shows a net operating loss of less than 1%.
The Company hopes, but cannot guarantee, to reverse this trend with increased
sales in the second half of 2005.
The Company had an after tax loss of $2,926 for second quarter 2005 compared to
an after tax loss of $200,565 for second quarter 2004. The effective tax rate
decreased from 37% to 32%. For the quarter ended June 30, 2005, the Company
recognized the impact of previous tax credits related to enterprise zone credits
and foreign territorial income exclusions not previously reflected.
Results of Operations. For the six month period ending June 30, 2005 as compared
with the six month period ending June 30, 2004.
7
Product sales decreased $666,632 or 10%. This decrease in revenue was primarily
a result of a drop off in sales due to increased competition and slower sales at
the retail level. The Company believes that the second half of the year will
bring a higher level of sales due to the seasonality of our primary product
line. The Company believes that it is now in a position to fill a higher level
of orders, should they occur. The Company cannot be sure that any increased
level of sales will occur.
Gross profit increased $149,006. As a percentage of sales, gross profit
increased 6%. A greater concentration of sales were to higher margin customers,
thereby reducing the cost of materials as a percentage of sales. The increase in
gross profit is also, but to a lesser extent, due to decreased costs of labor
and overhead and materials. The Company's capital investment in automation made
a positive impact on labor costs during 2005. The Company experienced increased
costs of overhead associated with the move into its new facility during 2004
which significantly explains the relatively smaller amount of overhead costs in
2005. The Company anticipates continued improvements in cost of operations and
is hopeful that gross profit will continue to make small incremental
improvement.
Engineering expenses decreased $55,266 due to an increased amount of engineering
salaries being capitalized in 2005 towards production automation projects.
Selling and marketing expenses decreased $44,524 due to a decrease in bad debt
expense. Bad debt write-offs in June 2004 resulted in the decrease. These costs
should remain stable going forward.
Administrative expenses decreased $73,896 due to a decrease in legal expenses,
moving expense and outside labor. These expenses were for extraordinary items
occurring in 2004. The Company expects these costs to remain consistent, except
for any increase in professional fees and expenses due to the contemplated
transactions with NVC, which the Company estimates to be $210,000.
Other expense consisting of stock related fees decreased $2,030, remaining
consistent from 2004 to 2005. Other expenses are expected to remain consistent
going forward.
The Company had an after tax loss of $18,591 in the first six months of 2005
compared to an after tax loss of $243,112 for the same period in 2004. The
effective tax rate for the first six months of 2004 was 37%, while the rate for
the first six months of 2005 was 32% consistent with management's expectations.
For the six months ended June 30, 2005, the Company recognized a tax benefit
related to the completion of the Company's previous year's tax return and
recognized the impact of previous tax credits related to enterprise zone credits
and foreign territorial income exclusions not previously reflected.
Liquidity and Capital Resources. Balance Sheet as of June 30, 2005
compared to December 31, 2004.
At June 30, 2005, the Company had $1,071,137 of cash and its current ratio was 4
to 1. The Company believes its current capital resources are sufficient to fund
operations for the next twelve months.
Net cash provided by operating activities in the amount of $582,665 consists of
the following:
Accounts receivable, net of allowance for doubtful accounts, decreased $461,474.
Decreased sales in second quarter 2005, compared to December, 2004 as well as
improved collections caused the decrease in accounts receivable. The Company
reduced past due receivables by over $400,000 from December 31, 2004 to June 30,
2005 and is working towards comprehensive customer account reconciliations to
reduce the amount of allowances against open past due balances. The Company
anticipates the third quarter to have similar revenue to the second quarter and
therefore expects accounts receivable will be consistent at the end of third
quarter
Inventory increased $308,589. This increase is due to a higher volume of
finished product inventory made to contribute to third and fourth quarter
projected sales.
Prepaid expenses and deposits decreased $187,296 due to first and second quarter
receipt of goods for which deposits existed at year-end.
Accounts payable decreased $33,108 due to timing of payments.
Accrued liabilities increased $1,852, remaining consistent with December 2004.
Reserve for returns decreased $110,446. Based on favorable historical trends,
the Company has lowered the amount it is accruing from 2.75% of revenues to
1.81%, on an annualized basis, for returns and allowances of their product. See
Note 4 of the financial statements.
8
Cash from investing activities:
Investment in property and equipment was $419,466. This is comprised of various
automation projects designed to reduce production labor costs and the addition
of a new accounting software package. Additional equipment additions are planned
for the third quarter.
Trends. Lip balm revenues, as the Company's major product line, in the first 6
months of 2005 were $4,829,343 as compared to $5,464,543 for the same period in
2004, or a 12% decrease. As stated above in results of operations, this decrease
in revenue was primarily a result of a drop off in sales due to increased
competition and slower sales at the retail level. The Company believes that the
second half of the year will bring a higher level of sales due to the
seasonality of our primary product line. The Company believes that it is now in
a position to fill a higher level of orders, should they occur. The Company
cannot be sure that any increased level of sales will occur. The Company's
promotional products business is trending upwards and is estimated to contribute
significantly to additional sales in the second half of 2005.
Sales of sour drops and breath fresheners were down by 13%. The Company
continues to maintain a solid base of customers. However, the Company is
uncertain about whether there will be opportunities to increase sales of this
product line.
The nutritional supplements, on a relatively smaller scale, showed a nominal
decline in revenue. Revenues were down $86,247 in the first six months of 2005
compared to 2004, or a 33% decrease. The Company has discontinued the product
line Cheat & Lean(TM). Therefore, revenues from this product line are expected
to further decline.
The Company introduced eye drops under the name EYELIEVE and filed for trademark
registration under this name. Sales of EYELIEVE in the second quarter were not
material, but the Company anticipates a material impact on its future business,
as its test markets have indicated that the Company should continue to promote
this business.
Impact of fuel increases. The Company has seen an increase in its cost of
plastic components and an increase in fuel surcharges by freight companies. If
these trends continue the Company could see further erosion on margins due to
higher costs.
Impact of Inflation. The Company's financial condition has not been affected by
the modest inflation of the recent past. The Company believes that revenues will
not be materially affected by inflation. The Company's lip care and oral care
products are primarily very low retail price points and impulse items. The
nutritional supplements are a small part (approximately 3%) of revenues and
could be negatively impacted by inflation.
The following table shows aggregated information about contractual obligations
as of June 30, 2005:
Payments Due by Period
-------------------------------------------------------------------------------
Total Less Than 1 Year 1-3 Years 4-5 Years After 5 Years
-----------------------------------------------------------------------------------------------------------------
Long-Term Debt $ 17,362 $ 8,437 $ 8,925
Building Lease $560,000 $225,000 $335,000
Vehicle Lease $ 3,000 $ 3,000
-----------------------------------------------------------------------------------------------------------------
Total $580,362 $236,437 $343,925
=================================================================================================================
9
ITEM 3. CONTROLS AND PROCEDURES
Control deficiencies have been identified by management in consultation with
Ehrhardt Keefe Steiner & Hottman PC, the Company's independent auditors. Certain
matters involving internal control deficiencies considered to be material
weaknesses under standards established by the American Institute of Certified
Public Accountants have been reported to the audit committee of the board of
directors. The material weaknesses relate to adjustments made by the auditors to
properly state certain inventory related balance sheet accounts that are a
result of non-timely account reconciliations and lack of oversight over the
accounting process, financial reporting and a lack of qualified accounting
personnel.
The primary objective of the Company's Inventory Control Program is to
continuously develop and implement systems by which the stated on-hand inventory
levels are both controllable and predictable. This critical objective will be
achieved through the utilization of quarterly physical inventories, regularly
scheduled cycle counts, data processing auditing and Kanban system utilization.
The Company believes the staff in place is capable of carrying out this
objective through 2005 and beyond.
The lack of timely reconciling of balance sheet accounts can be significantly
attributed to inadequate human resources. The Company did commit significant,
but not adequate, human resources to address this. Meanwhile internal daily
audit processes were not followed further impacting the timeliness of
reconciling account balances. The Company has reinstated internal audit
requirements and timely monthly account reconciliations in the second quarter of
2005 with full compliance expected in the third quarter of 2005.
The lack of oversight over the accounting process, financial reporting and lack
of qualified accounting personnel is also being addressed through the internal
audit process; utilization of improved software capabilities such as automated
reports (Business Alerts) as to daily revenues, sales orders due to ship report,
payroll report, cash flow, etc. that are being reviewed by management on a daily
basis; and although accounting staff is qualified and trained to manage and
process using generally accepted accounting practices (GAAP), training is
required and planned during 2005 for more extensive learning of financial
accounting standards (FASB) that focus more on proper disclosure and recognition
of financial reporting information.
Evaluation of Disclosure Controls and Procedures. The Company's Chief Executive
Officer and its Chief Financial Officer, after evaluating the effectiveness of
the Company's 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 quarterly report on Form 10-QSB (the "Evaluation Date")), have
concluded that as of the Evaluation Date, the Company's disclosure controls and
procedures were adequate and effective to ensure that material information
relating to the Company and its consolidated subsidiaries would be made known to
them by others within those entities, particularly during the period in which
this quarterly report on Form 10-QSB was being prepared.
10
PART II - OTHER INFORMATION
ITEM NO. 1. LEGAL PROCEEDINGS. THE COMPANY IS NOT A PARTY, NOR ARE ITS
properties subject to, any material pending legal proceedings other than
ordinary routine litigation incidental to the Company's business and the matters
described in the Company's 2004 Annual Report on Form 10-KSB/A.
ITEM NO. 2. CHANGES IN SECURITIES. NONE.
ITEM NO. 3. DEFAULTS UPON SENIOR SECURITIES. NONE.
ITEM NO. 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE.
ITEM NO. 5. OTHER INFORMATION.
As previously announced by the Company in its Form 8-K filed on February 23,
2005, OraLabs entered into a Definitive Agreement with NVC Lighting Investment
Holdings Limited under which OraLabs will acquire NVC and convey its ownership
of OraLabs, Inc. to OraLabs' President, Gary H. Schlatter. Control of the
Company would change from Mr. Schlatter to the owners of NVC and their
designess. Closing under the Definitive Agreement is conditioned upon many
requirements and there can be no assurance that the closing will occur. The
Company filed with the Securities and Exchange Commission on August 12, 2005, a
Preliminary Proxy Statement that includes detailed information about the
Definitive Agreement and the proposed transactions. The contents of the
Preliminary Proxy Statement may be materially revised prior to becoming the
Definitive Proxy Statement. NVC's Consolidated Financial Statements as of
December 31, 2004 including the report of its Independent Registered Public
Accounting Firm, NVC's Consolidated Financial Statements as of March 31, 2005,
and NVC's Consolidated Financial Statements as of June 30, 2005 are attached
hereto as Exhibits 99.1, 99.2 and 99.3.
ITEM NO. 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required to be filed are listed below: Certain of the following
exhibits are hereby incorporated by reference pursuant to Rule 12(b)-32 as
promulgated under the Securities and Exchange Act of 1934, as amended, from the
reports noted below:
Exhibit
No. Description
--- -----------
3.1(i)(1) Articles of Incorporation
3.1(ii)(2) Amended and Restated Bylaws
3.1(ii)(4) Second Amended and Restated Bylaws
4(2) Specimen Certificate for Common Stock
10.1(2) 1997 Stock Plan
10.2(2) 1997 Non-Employee Directors' Option Plan
10.3(3) Amended and Restated Employment Agreement Between the
Company's Subsidiary and Gary Schlatter
10.4(2) Stock Option Grant under 1997 Non-Employee Directors' Option Plan
10.5(i)(5) Business Lease between the Company's Subsidiary and Gary
Schlatter (September 1, 2000)
10.5(iii)(8) Amended Business Lease between the Company's Subsidiary and 2780
South Raritan, LLC effective October 15, 2000.
10.5(iv)(9) Lease between the Company's Subsidiary and 18501 East Plaza Drive,
LLC dated September 4, 2003
10.9(7) Agreement (effective May 1, 2000, amending the Employment Agreement
listed above as Exhibit 10.3).
10.10(10) Amended and Restated Employment Agreement between the Company's
Subsidiary and Gary Schlatter dated May 1, 2003
10.11(11) Stock Exchange Agreement between the Company, NVC Lighting
Investment Holdings Limited and others dated February 23, 2005
11 No statement re: computation of per share earnings is required
since such earnings computation can be clearly determined from the
material contained in this Quarterly Report on Form 10-QSB.
21(2) List of Subsidiaries of the Company
31.1(12) Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002
31.2(12) Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002
32.1(12) Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
32.2(12) Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
99.1(12) NVC's Consolidated Financial Statements as of December 31, 2004,
including the report of its Independent Registered Public
Accounting Firm.
99.2(12) NVC's Consolidated Financial Statements as of March 31, 2005
99.3(12) NVC's Consolidated Financial Statements as of June 30,
2005
11
1 Incorporated herein by reference to Exhibit C of the Definitive Information
Statement filed by the Company's predecessor, SSI Capital Corp., on July
24, 1997.
2 Incorporated herein by reference to the Company's Form 10-K filed for
fiscal year 1997.
3 Incorporated herein by reference to Exhibit B of the Form 8-K filed by the
Company's predecessor, SSI Capital Corp., on May 14, 1997.
4 Incorporated herein by reference to the Company's Form 10-KSB filed for
fiscal year 1998.
5 Incorporated herein by reference to the Company's Form 10-QSB filed for the
quarter ended September 30, 2000.
6 N/A
7 Incorporated herein by reference to the Company's Form 10-QSB filed for the
quarter ended March 31, 2000.
8 Incorporated herein by reference to the Company's Form 10-KSB filed for
fiscal year 2000.
9 Incorporated herein by reference to the Company's Form 10-QSB filed for the
quarter ended September 30, 2003.
10 Incorporated herein by reference to the Company's Form 10-QSB filed for the
quarter ended June 30, 2003.
11 Incorporated herein by reference to the Company's Form 8-K filed February
24, 2005.
12 Filed herewith.
(b) A report on Form 8-K was filed by the Company on June 24, 2005, concerning
the Definitive Agreement described in Item no. 5, Other Information, above.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORALABS HOLDING CORP.
BY: /S/ GARY H. SCHLATTER
---------------------
GARY H. SCHLATTER, PRESIDENT
BY: /S/ EMILE J. JORDAN
-------------------
EMILE J. JORDAN, CHIEF FINANCIAL OFFICER
DATED: DECEMBER 19, 2005
13
Exhibit Index
Exhibit
No. Description
--------- ------------
31.1 Certification of President 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 President pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.1 NVC's Consolidated Financial Statements as of December 31,
2004, including the report of its Independent Registered
Public Accounting Firm
99.2 NVC's Consolidated Financial Statements as of March 31, 2005
99.3 NVC's Consolidated Financial Statements as of June 30, 2005
14