UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB Amendment 1
Orange Productions, Inc.
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(Name of Small Business Issuer in its charter)
Securities to be registered under Section 12(b) of the Act:
FLORIDA 65-0790763
- ---------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization )
222 Lakeview Avenue, Suite 113
West Palm Beach, FL 33401
- ----------------------------- -----------------------------
(Address of principal place of business) (Zip Code)
Issuer's telephone number: (404) 321-1192
Title of each class Name of each exchange on
to be so registered which each class to
be registered
None
- ------------------------ ---------------------------
Securities to be registered under Section 12(g) of the Act:
(Common Stock, $.0001 par value)
--------------------------------
(Title of class)
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480;
Tel: (561) 832-5696
<PAGE>
Part I
Item 1. Description of Business.
(a) Business Development.
Orange Productions, Inc. (hereinafter referred to as the "Company" or
"OPI") was organized under the laws of the State of Florida on May 20, 1998. The
Company was organized by Mr. Sam Peroulas, the executive officer and director of
the Company, for the purpose of engaging in graphic arts services to various
consumer groups. The Company's executive offices are presently located at 222
Lakeview Avenue, Suite 113, West Palm Beach, Florida 33401 and its telephone
number is (404) 321-1192.
The Company is filing this Form 10-SB on a voluntary basis so
that the public will have access to the required periodic reports on the
Company's current status and financial condition. The Company will file periodic
reports in the event its obligation to file such reports is suspended under the
Securities and Exchange Act of 1934 (the "Exchange Act".)
The Company generally has been inactive, having conducted no business
operations except organizational and fund raising activities since its
inception. OPI received gross proceeds in the amount of $20,175 from the sale of
a total of 403,500 shares of common stock, $.0001 per value per share (the
"Common Stock"), in an offering conducted pursuant to Section 3(b) of the
Securities Act of 1933, as amended (the "Act"), and Rule 504 of Regulation D
promulgated thereunder ("Rule 504"). This offering was made in the State of
Georgia and the State of Florida. The Company undertook its offering of shares
of Common Stock pursuant to Rule 504 on May, 1998. While no offering memorandum
was used in connection with these offerings, the business plan of the Company,
which was disclosed to each prospective investor, was to provide for graphic
arts services to various consumer groups. Neither Georgia nor Florida required a
disclosure document under the terms of the exemption under which these offerings
were made.
There are no preliminary agreements or understandings between the Company
and its officers and directors or affiliates or lending institutions with
respect to any loan agreements or arrangements.
The Company intends to offer additional securities under Rule 506 of
Regulation D under the Act ("Rule 506) to fund its short and medium term
expansion plans. (See Part I, Item 1.
"Description of Business - (b) Business of Issuer.")
See (b) "Business of Issuer" immediately below for a description of the
Company's proposed business. As of the date hereof, the Company has no temporary
staff or clients for its contemplated operations.
(b) Business of Issuer.
General
Since its inception, the Company has conducted no business operations except
for organizational activities and an offering of Common Stock pursuant to which
it has received gross offering proceeds in the amount of $20,175. Further, the
Company has had no employees since its organization. It is anticipated that the
Company's sole executive officer and director will receive a reasonable salary
for services as executive officer at such time as the Company commences business
operations. (See Part I, Item 6. "Executive Compensation.") This individual will
devote such time and effort as may be necessary to participate in the day-to-day
management of the Company. (See Part I, Item 5. "Directors, Executive Officers,
Promoters and Control Persons - Executive Officers and Directors.")
The following discussion of the graphic arts services market, as it relates
to the Company's medium and long term business objectives, is of course
pertinent only if the Company is successful in obtaining sufficient debt and/or
equity financing to commence operations and, in addition thereto, is able to
<PAGE>
generate significant profits from operations (which are not expected in the
foreseeable future) and/or additional financing to continue in business and/or
fund the anticipated growth, assuming OPI's proposed business is successful.
There can be no assurance such financing can be obtained or that the Company's
proposed business will be successful.(See Part I. Item 1.-" ( b) Business of
Issuer - Risk Factors" )
Mr. Peroulas decided to pursue the graphic arts services business via the
Company because of the belief that his formal training, will enable him to
develop a successful company which will have the advantages of, among other
things, greater availability of capital and potential for growth through the
vehicle of a public company as compared to a privately-held company. The time
required to be devoted to manage the day-to-day affairs of the Company is
presently estimated to be approximately five to ten hours per week. This time
commitment on the part of Mr. Peroulas is expected to increase at such time, if
ever, as OPI obtains sufficient funding with which to commence the search for
business in the graphics art field. (See Part I, Item 1. "Description of
Business," (b) "Business of Issuer - Risk Factors.")
The Company will be dependent upon Mr. Peroulas to develop the client base
with whom to arrange funding. Mr. Peroulas has extensive experience in the
business and has managed his own business for the last two (2) years. While Mr.
Peroulas has been successful in the past, there can be no assurance that he will
be successful in building the client base necessary for the successful operation
of the Company. (See Part I, Item 1. "Description of Business" (b) "Business of
Issuer - Risk Factors", "Dependence on Management.")
The Company intends to initially prospect graphic arts services to consumers
in the Atlanta, Georgia area, then enlarging to the entire State of Georgia and
thereafter in selected areas nationwide. The Company plans to be able to provide
a full spectrum of services for its clients. Graphic arts work will be made
available to newspapers and magazines as well as publishing and printing to
individual consumers.
In its initial phase, the Company will operate out of the facility provided
by Mr. Peroulas. Mr. Peroulas will begin by finding clients for the Company. In
the event the Company requires additional capital during this phase, Mr.
Peroulas has committed to fund the operation until such time as additional
capital is available. This verbal commitment by Mr. Peroulas is to fund
administrative costs of the business including the cost of '34 Act compliance.
Due to the limited capital available to the Company, the principal risks
during this phase are that the Company is dependent upon Mr. Peroulas' efforts,
and that the Company will not be able to establish a sufficiently profitable
client base to establish the business. (See Part I, Item 1. "Description of
Business," (b) "Business of Issuer - Risk Factors", "Dependence on Management")
To implement the initial plan, the Company intends to initiate a
self-directed private placement under Rule 506 in order to raise an additional
$100,000. In the event such placement is successful, the Company believes that
it will have sufficient operating capital to meet the initial expansion goals in
the Atlanta, Georgia area and pay administrative operating costs for a period of
six (6) months. In the event the Company is not successful in raising such
funds, the Company believes that it will not be able to continue operations past
a period of six(6) to nine (9) months.
Even if the Company is successful at raising this additional money, there
can be no assurance that the implementation of the expansion of the initial plan
will increase the number of potential customers. By expanding, the Company may
face unforeseen costs associated with entry into the business. The Company still
will be largely dependent upon Mr. Peroulas to find suitable clients on a
profitable and timely basis. Additionally, Mr. Peroulas may have a conflict
between the time demands of an expanding business and the time requirements of
his existing business. Although the Company believes $100,000 is sufficient to
cover operations for the projected period, there can be no assurance that such
funding can cover the additional risks associated with expansion. (See Part I,
Item 1. "Description of Business," (b) "Business of Issuer - Risk Factors",
"Conflict of Interest.")
If the Company is able to generate enough revenue during the initial phase
to support the business in the Atlanta, Georgia, in the medium term, the Company
<PAGE>
plans to open one (1) additional office each quarter until such time as it has
four (4) offices operating. The Company anticipates approximately $500,000 in
revenues will be necessary to justify the four (4) additional office openings.
The Company intends to open the first expansion office outside Atlanta, Georgia,
in other metropolitan areas in Georgia, since Mr. Peroulas is familiar with the
business environment there. The Company anticipates that it will require an
additional $100,000 to fund one (1) year of operations at this second location,
acquisition of office space, equipment and wages for clerical staff. The Company
also believes that Mr. Peroulas will be capable of managing the Atlanta,
Georgia, operation at this time, while a third party will oversee any new
location. To fund the expansion, the Company intends to initiate another
self-directed Rule 506 offering to raise $100,000. If the Company is not
successful in raising such additional funds, the Company believes that it will
not be able to operate a second location without creating a financial drain on
the first location. Even if it is successful, there can be no assurance that the
Company will achieve any acceptance in the Atlanta, Georgia, marketplace and may
not establish a sufficient client base to make the venture viable.
During the first quarter in which the second location office is operating,
the Company intends to seek funding through an additional Rule 506 offering,
seeking an additional $300,000. Such funds will be utilized to open the third
and fourth offices during the next two quarters. While office space, clerical
help, equipment costs and operations for a one (1) year period are not
anticipated to exceed $100,000, the Company believes Mr. Peroulas should be
placed on an annual salary and that advertising and promotional costs must be
increased in order to increase the accessability to a broader range of potential
clients. Also, in order to be competitive with others, the Company must
implement an employee benefit program. The Company believes that the additional
$100,000 of the planned offering should be sufficient to cover these increased
costs. The Company plans to open its third and fourth offices immediately
contiguous to Atlanta, Georgia. The Company believes that by covering these
contiguous counties in Georgia, that it will have access to a broader range of
potential clients. Further, it believes that operations in the contiguous
counties and in Atlanta, Georgia, will lead to economies of scale which will
increase the potential profitability of the Company. Areas in which the Company
believes it will have the benefit of the greatest economies of scale are
advertising, expenses and the availability of a larger market.
The principal risks of these expanded operations would be unforeseen costs
associated with entry into the expanded market, increased costs associated with
a larger geographic area of coverage, and additional clerical employee related
claims associated with a larger support staff, inability to establish a presence
in the expanded market place, increased competition and increased risk
associated with the lapse between costs associated with the additional locations
and the receipt of the stream of cash flows related to each location. Should the
Company incur any large liabilities because of its operations, which risk
increases as the Company's geographic coverage expands, such liabilities could
have a substantially detrimental affect upon the Company's financial condition.
Further, should the Company be unable to secure the financing required for the
additional expansion, the anticipated revenues from a reduced operation, while
potentially able to meet the operating needs of the Company, would impede the
likelihood of incremental revenue increases necessary for the long term
financial success of the Company. (See Part I, Item 1. "Description of Business
- - (b) Business of Issuer - Risk Factors", "Need to Re-Sell Acquired Receivable
in Secondary Markets", "Lack of Working Capital Funding Source.")
The Company plans to monitor closely its medium term operations for
approximately one (1) year. (See Part I, Item 1. "Description of Business - (b)
Business of Issuer - "Business Strategy.") If it has been successful in securing
the necessary financing and if each of the operations is capable of sustaining
itself, the Company intends to seek additional financing through the offering of
additional equity securities of Rule 506, conventional bank financing, small
business administration financing, venture capital or the private placement of
corporate debt for a total of approximately $1,000,000. There can be no
assurance that any of these financing sources will be available to the Company.
If the Company plan to seek additional financing is successful, the Company
intends to open additional offices which compliment the Atlanta, Georgia and
contiguous operations, and to add a regional manager to oversee these additional
operations. The Company believes that such expansion will achieve similar
economies of scale as those which are anticipated by the initial locations.
Further, the Company believes that such expansion will place the Company in a
position to be a major force in the industry in the State of Georgia. If such
<PAGE>
expansion is implemented, Mr. Peroulas believes that they will be able to
oversee the operation with the addition of the manager.
The Company has not sought as of yet any debt financing since it believes
that any qualified venture capital firm will not loan any funds to the Company
until such time as it is fully reporting and has completed at least two years of
profitable operations. Once it has met their criteria, the Company intends to
seek out funds from licensed venture capital firms and to negotiate terms which
will fit the financial capabilities of the Company. Since the Company does not
intend to seek debt financing until such time as it has several locations
operating successfully, it believes that it can negotiate appropriate placement
and repayment terms for such borrowings. However, there can be no assurance that
such funds will be available to it or that suitable terms which are most
advantageous to the Company can be negotiated. In addition, the Company does
not, at this time, anticipate that it will require substantial leverage to fund
the expanded operations. However, in the event the Company did receive debt
financing and in the event the Company is not successful in sustaining
operations or meeting such debt and defaulted in its payments on the debt, then
such debt financing would result in foreclosure upon the Company's assets to the
detriment of its shareholders.
Although the Company is authorized to borrow funds, as discussed, it does
not intend to do so until such time as it has been operating for a given period
of time. At such time as the Company seeks borrowed funds, it does not intend to
use the proceeds to make payments to the Company's promoters(if any), management
(except as reasonable salaries, benefits and out of pocket expenses) or their
respective affiliates or associates, if any. The Company has no present
intention of acquiring any assets or other property owned by any promoter,
management or their respective affiliates or associates or acquiring or merging
with a business or company in which the Company's promoters, management or their
respective affiliates or associates directly or indirectly have an ownership
interest. Existing conflict of interest provisions are set forth in the Amended
Articles of Incorporation for the Company. Management is not aware of any
circumstances under which this policy, through their own initiative, may be
changed. Although there is no present potential for a related party transaction,
in the event that any payments are to be made to promoters and management such
will be disclosed to the security holders and no such payments will be made in
breach of the fiduciary duty such related persons have to the Company.
There are no arrangements, agreements or understandings between
non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the
management of the Company's affairs. There are no arrangements, agreements or
understandings under which non-management shareholders will exercise their
voting rights to continue to elect the current directors to the Company's Board
of Directors.
In the event the Company is successful in securing the additional financing
for its long term expansion, it plans to seek acquisitions of qualified
companies which the Company believes will compliment its overall strategy inside
and outside of the State of Georgia. The Company will seek acquisitions of
related companies and expand its operations to eventually encompass the entire
United States. At such time as the Company enters the market outside the State
of Georgia, the Company will be required to comply with applicable state
regulations regarding such entities. (See Part I, Item 1. "Description of
Business," (b) "Business of Issuer - Industry Regulations - ;and (b) "Business
of Issuer - Risk Factors", Governmental Regulation and Litigation")
Such increased expansion may increase greatly the risks associated with the
Company's operations. The Company will continue to be dependent upon obtaining a
sufficient client base which possesses an appropriate number of consumer
contracts. Increased operations and expansion into other geographic areas expose
the Company to the potential of unfavorable interpretation of government
regulations. In addition, the larger the geographic market, the greater the
chance of increased support staff costs. Furthermore, expansion will expose the
Company to competition from larger and more established firms, many of whom have
greater resources than the Company. The Company anticipates that revenues from
such expanded operations may result in greater revenue fluctuations as a result
of seasonal variations in the market and the Company's support staffing needs.
Also, the Company will be required to pay wages to a larger support staff while
still experiencing 30 to 45 day delays in direct payments received from the new
receivables. In addition, with expansion and implementation of an employee
<PAGE>
benefit plan which is necessary in order to be competitive for qualified
employees, in the event such plan were to be disallowed, loss of qualified
status could have an adverse effect upon the Company. Finally, as a larger
Company, it could face possible adverse affects from fluctuations in the general
economy and business of its clients. (See Part I, Item 1. "Description of
Business," (b) "Business of Issuer - Risk Factors", "Competition", "Sensitivity
to Interest Rates.")
Another avenue available to the Company to aid its ability to expand is to
seek a reverse merger with a larger, public company. While the Company has no
present intention to seek such a merger, in the event that an appropriate
vehicle were to become known to the Company, the Board of OPI would evaluate the
relative risks and merits of such a merger to the overall plans for the Company.
The Company may also seek to expand by acquisitions of unrelated companies which
engage in related services.
As a reporting company the Company is required to file quarterly reports on
Form 10-QSB and annually on Form 10-KSB and in each case, is required to provide
the financial and other information specified in such forms. In addition, the
Company would be required to file on Form 8-K in the event there was a change of
control, if the Company acquires or disposes of assets, if there is a bankruptcy
or receivership, if the Company changes its certified accountants, upon the
occurrence of other events which may be pertinent to the security holders, and
after certain resignations of directors. Being subject to such reporting
requirements reduces the pool of potential acquisitions or merger candidates for
the Company since such transactions require that certified financials must be
provided for the acquiring, acquired or merging candidate within a specified
period of time. That is why the Company intends to expand through internal
operations through the short and medium term. At such time as the Company will
seek acquisitions or mergers, it will limit itself to companies which either
already have certified financial statements or companies whose operations lend
themselves to review for a certified audit within the required time.
Business Strategy
The Company's business strategy, which is dependent upon its obtaining
sufficient financing with which to implement its business plan (of which there
is no assurance), is to provide graphic arts services to consumers. The
Company's primary revenues will be based upon sales of graphic arts services to
the consuming public. The Company's revenues are dependent on the number of
consumers who will purchase its services, the percentage of non-performing
receivables when such services are financed by the Company and the number of
bulk purchases that the Company is able to successfully generate to commercial
accounts.
Company's primary direct costs will be (i) salaries to Mr. Peroulas
(payroll cost), (ii) marketing and sales related costs, (iii) employment related
taxes and (iii) health benefits. (See Part I, Item 1, "Description of
Business,") Employment related taxes consist of the employer's portion of
payroll taxes required under the Federal Income Contribution Act ("FICA"), which
includes Social Security and Medicare, and federal and state unemployment taxes.
The federal tax rates are defined by the appropriate federal regulations. State
of Georgia unemployment tax rates are affected by claims experience, of which
the Company has none at this time. Health benefits are comprised primarily of
medical insurance costs, but also include costs of other employee benefits such
as prescription coverage, vision care, disability insurance and employee
assistance plans.
The Company's gross profit margin will be determined in part by its ability
to minimize and control operating costs, maximize its market penetration as to
graphic arts services sales to the consuming public; being able to provide
reliable direct financing to individual and commercial consumers who are high
quality credit risks; and, how successful the Company will be in receivable
financing.
The Company's objective is to become a dominant provider of graphic arts
services first in a select geographic area, beginning in Georgia, and then to
contiguous counties in Georgia and, thereafter into selected areas nationwide.
To achieve this objective, and assuming that sufficient operating capital
becomes available, the Company intends to: (i) provide a comprehensive package
of graphic arts services to both commercial clients and individuals and, (ii)
focus on the Atlanta, Georgia, market which the Company believes has high growth
opportunities.
<PAGE>
Management expects in the event OPI achieves commercial success initially to
increase the Company's market penetration through internal expansion and
thereafter through selected acquisitions. Such acquisitions could include
companies related thereto. Management believes that due to the present economic
environment, expansion into markets beyond the State of Georgia could be
especially attractive because it is believed that the internal structuring of a
successful operation in Georgia can be replicated in other select geographic
areas with strong growth opportunities. However, such expansion presents certain
challenges and risks. There is no assurance that OPI, even if it is successful
in establishing a presence in its targeted market, will be able to profitably
penetrate these additional markets.
Management
Mr. Peroulas has been managing his own company in the industry for
approximately the past two years (2). Under Mr. Peroulas' direction, the Company
plans to offer clients a full array of graphic arts services. Mr. Peroulas will
direct his existing graphic arts business to the Company while continuing to
fund his personal needs through his consulting activities as a microbiologist.
An ongoing project for a current employer is now anticipated to be completed in
November 1999 and Mr. Peroulas will devote more time to the business of the
Company thereafter and will not undertake additional work for that employer. It
is anticipated, and subject to the availability of additional funding, that the
Company will employ a manager, additional clerical support and an accountant.
The Company believes that its initial success will be due in part to the
familiarity of Mr. Peroulas with the business. He will visit clients and
prospective clients on a regular schedule to allow for sales development of the
Company's services and to permit strong business relationships to develop. To
maintain client satisfaction, Mr. Peroulas will pursue a pro-active approach
with prospective and existing clients to anticipate their needs.
Management is unable at this time to forecast with any degree of certainty
the acceptance of the Company's services or the expenses of doing business;
however, OPI intends to aggressively market its programs in the Company's target
markets.
Sales and Marketing
The Company plans to market its service and programs through a combination
of marketing channels including direct sales, franchises and strategic
alliances. The Company believes that this multi-channel approach will allow the
Company to quickly acquire a critical mass of customers, penetrate a pool of
business and commercial clients, develop regional awareness and ultimately
become a market leader in the provision of graphic arts services. Of the three
marketing channels intended to be employed by the Company, direct sales is
recognized as the most common in the industry; furthermore, strategic alliances
have often been used. In addition, franchising is an often used means whereby a
company can further expand its revenue stream not only in obtaining additional
outlets for its services and sales but also by the receipt of franchise
revenues. In addition, another benefit to franchising has been the further
recognition of a company's brand-name in the marketplace by consumers.
Nevertheless, there can be no assurance that any of these techniques will be
used or will be successful. The Company intends to compete, assuming that it is
successful in obtaining sufficient financing, with other companies in its target
markets who are currently providing programs.
The Company anticipates that its initial marketing efforts will be in the
area of direct sales. Good quality presentations and professional follow-up with
consumers will be essential to the Company's success. Initially, Mr. Peroulas
will secure the Company's client base. However, the Company anticipates that it
will employ qualified sales personnel to establish new customer accounts. The
Company believes that by employing its own sales personnel it will be able to
penetrate additional markets at a minimal cost since sales associates receive
compensation in the form of commissions based upon a client's use of the
Company's programs. This commission based compensation program will reduce
overhead costs for the Company.
<PAGE>
The Company's ability to develop markets through the efforts of Mr. Peroulas
and, eventually a sales force is, of course dependent upon management's ability
to obtain necessary financing, of which there can be no assurance. Assuming the
availability of adequate funding, OPI intends to stay abreast of changes in the
marketplace by ensuring that it remain in the field where clients and
competitors can be observed firsthand.
The Company will attempt to maintain diversity within its client base in
order to decrease its exposure to downturns or volatility in any particular
industry. As part of this client selection strategy, the Company intends to
offer its services to those clients which have a reputation for reputable
dealings and, eliminating clients that it believes present a higher credit risk.
Where feasible, the Company will evaluate beforehand each client for their
creditworthiness.
Competition
Graphic Arts Services involve the simple printing of stationary to the major
production of highly visible publication such as a magazine and newspaper. The
Company is expected to experience intense competition in the graphic arts
publishing and printing business both on an a consumer market basis and on a
commercial account basis. There are a number of smaller companies as well as
larger established companies that compete for graphic arts services in the
Atlanta, Georgia, market. Many of the larger companies are better capitalized
that the Company and/or have greater personnel resources and technical
expertise. Some of the principal companies in the graphic arts business with
whom the Company can expect to compete include but are not limited to the
following: Western Publishing Company, Inc., Greenwich Work Shop, Haddly House
and Lighthouse Publishing. In view of the Company's extremely limited financial
resources, the Company will be at a significant competitive disadvantage as
compared to the Company's competitors.
Industry Regulation
Overview
As an employer, the Company is subject to all federal, state and local
statutes and regulations governing its relationship with its employees and
affecting businesses generally.
Seasonality
The Company believes that its results of operations will not be impacted
by any seasonal fluctuations either in the general economy or with regard to
general seasonal climactic changes.
Employees and Consultants
The Company has had no employees since its organization. In addition,
Mr. Peroulas, (the Company's sole executive officer and director), has served in
those positions without compensation through the date hereof. Mr. Peroulas was
compensated, in the form of restricted common stock for management services
relating to the formation of the Company and for financial consulting services.
The Company has not realized significant revenues since its inception
due to the fact that its key executive, Mr. Peroulas, has committed to complete
a project with his current employer which is scheduled for completion in August
1999. Upon finishing his product, Mr. Peroulas will pursue the graphic arts
services business because of the belief that his prior formal business training,
when combined with his years of experience in the industry, will enable him to
develop a successful company which will have the advantages of among other
things, greater availability of capital and potential for growth through the
vehicle of a public company as compared to a privately-held company.
The Company will be dependent upon Mr. Peroulas to develop the client base.
Mr. Peroulas has many years of experience in business and has managed his own
business for several years. The Company plans to use to its advantage Mr.
Peroulas' reputation in the industry. Mr. Peroulas will direct his existing
<PAGE>
graphic arts business to the Company while continuing to fund his personal needs
through his consulting activities as a microbiologist. An ongoing project for a
current employer is now anticipated to be completed in November 1999 and Mr.
Peroulas will devote more time to the business of the Company thereafter and
will not undertake additional work for that employer. Nevertheless, while Mr.
Peroulas has been successful in the past, there can be no assurance that he will
be successful in building the client base and client solicitation program
necessary for the successful operation of the Company.
Facilities
The Company maintains its office rent free at the residence of Mr. Sam
Peroulas, the sole Officer and Director of the Company, at 222 Lakeview Avenue,
Suite 113, West Palm Beach, Florida 33401. Its telephone number is (404)
321-1192. The Company anticipates that it will have continued use of this office
on a rent-free basis for the foreseeable future and that this arrangement will
be adequate for the Company's needs while it is in the development stage.
Assuming that OPI obtains the necessary additional financing and is successful
in implementing its business plan, no assurance of which can be made, the
Company will require its own commercial facility in Atlanta, Georgia. In such
event, management believes that OPI would be able to locate adequate facilities
at reasonable rental rates in Atlanta, Georgia, suitable for its future needs.
Risk Factors
Before making an investment decision, prospective investors in the
Company's Common Stock should carefully consider, along with other matters
referred to herein, the following risk factors inherent in and affecting the
business of the Company.
1. Development Stage Company. OPI was only recently organized on May 20,
1998, and accordingly, is in the early form of development stage and must be
considered promotional. Management's efforts, since inception, have been
allocated primarily to organizational and fund raising activities and the
ability of the Company to establish itself as a going concern is dependent upon
the receipt of additional funds from operations or other sources to continue
those activities. Potential investors should be aware of the difficulties
normally encountered by a new enterprise in its development stage, including
under-capitalization, cash shortages, limitations with respect to personnel,
technological, financial and other resources and lack of a client base and
market recognition, most of which are beyond the Company's control. The
likelihood that the Company will succeed must be considered in light of the
problems, expenses and delays frequently encountered in connection with the
competitive environment in which the Company will operate. The Company's success
depends to a large extent on establishing a client base. There is no guarantee
that the Company's proposed activities will attain the level of recognition and
acceptance necessary for the Company to find a niche in the industry. There are
numerous competitors in Atlanta, Georgia, the contiguous areas and the remaining
State of Georgia and nationwide, several of which are large public companies,
which are already positioned in the business and which are better financed than
the Company. There can be no assurance that the Company, with its very limited
capitalization, will be able to compete with these companies and achieve
profitability. (See Part I, Item 1. "Description of Business.")
2. No Operating History, Revenues or Earnings. As of the date hereof,
the Company has not yet commenced operations and, accordingly, has received no
operating revenues or earnings. Since its inception, most of the time and
resources of OPI's management have been spent in organizing the Company,
obtaining interim financing and developing a business plan. The Company's
success is dependent upon its obtaining additional financing from intended
operations, from placement of its equity or debt or from third party funding
sources. The Company's success in the business is dependent upon the purchasing
of services by consumers, which are not expected for the foreseeable future,
and/or additional financing to enable the Company to continue in operation.
There is no assurance that OPI will be able to obtain additional debt or equity
financing from any source. The Company, during the development stage of its
operations, can be expected to sustain substantial operating expenses without
generating any operating revenues or the operating revenues generated can be
expected to be insufficient to cover expenses. Thus, for the foreseeable future,
unless the Company attains profitable operations, which is not anticipated, the
<PAGE>
Company's financial statements will show an increasing net operating loss. (See
Part I, Item 1. "Description of Business.")
3. Minimal Assets, Working Capital and Net Worth. As of February 28 ,
1999, the Company's total assets in the amount of $20,177, consisted,
principally, of paid-in capital of $20,340 less accrued expenses. As a result of
its minimal assets, as of February 28, 1999, the Company has very minimal net
worth presently. Further, OPI's working capital is presently minimal and there
can be no assurance that the Company's financial condition will improve. The
Company is expected to continue to have minimal working capital or a working
capital deficit as a result of current liabilities. The Company, at inception,
issued 1,650,500 shares of the Company's Common Stock to Mr. Sam Peroulas,
executive officer and director of OPI, in consideration and exchange therefore
for services in connection with the organization of OPI performed for the
Company by him. During May, June and September, 1998, the Company received cash
totaling $20,175.00 from the sale of 403,500 shares of Common Stock $0.05 per
share(the "Common Stock") in an private placement conducted pursuant to an
exemption from registration with the United States Securities and Exchange
Commission contained in sections 3(b) and 4(2) of the Securities Act of 1933 and
Rule 504 of Regulation D promulgated thereunder. The offering was made in the
State of Florida and Georgia. While no offering memorandum was used in
connection with these offerings, the business plan of the Company, which was
disclosed to each prospective investor, was to provide for graphic arts services
to various consumer groups. Neither Georgia nor Florida required a disclosure
document under the terms of the exemption under which these offerings were made.
(See: Part I, Item 10.
"Recent Sales of Unregistered Securities").
Even though management believes, without assurance, that it will
obtain sufficient capital with which to implement its business plan on a limited
scale, the Company is not expected to continue in operation without an infusion
of capital. In order to obtain additional equity financing, management may be
required to dilute the interest of existing shareholders or forego a substantial
interest of its revenues, if any. (See Part I, Item 1. "Description of
Business")
4. Need to Re-Sell Acquired Receivable in the Secondary Markets. The
Company has minimal working capital therefore it will be critical that any and
all cash resources utilized by the Company be maximized. The Company will bundle
together its receivables, the size of which will be determined by the quality of
receivables, for the purpose of re-selling them in a public and/or private
offering for purchase by an institutional investor and/or an individual. This
reselling will restore working capital to the Company with which it can put back
to work to finance future operations. There is no assurance, however, that the
Company will be successful in its efforts to resell these "bundled" securities
in the secondary market and may, if unsuccessful, be limited in its attempt to
become a viable company.
5. Need for Additional Capital: Going Concern Qualification Expressed by
Auditor. Without an infusion of capital or profits from operations, the Company
is not expected to continue in operation after the expiration of the period of
six (6)to nine(9)months from the date hereof. Accordingly, the Company is not
expected to become a viable business entity unless additional equity and/or debt
financing is obtained. OPI's independent certified public accountant, Durland &
Company, P.P.A.'s, has expressed this as a "going concern" qualification on the
Company's financial statements. The Company does not anticipate the receipt of
operating revenues until management successfully implements its business plan,
which is not assured. Further, OPI may incur significant unanticipated
expenditures which deplete its capital at a more rapid rate because of among
other things, the development stage of its business, its limited personnel and
other resources and its lack of a clients and market recognition. Because of
these and other factors, management is presently unable to predict what
additional costs might be incurred by the Company beyond those currently
contemplated to obtain additional financing and achieve market penetration on a
commercial scale in its proposed line of business. OPI has no identified sources
of funds, and there can be no assurance that resources will be available to the
Company when needed.
6. Dependence on Management: The possible success of the Company is
expected to be largely dependent on the continued services of Mr. Sam Peroulas.
Virtually all decisions concerning the clients to contact, the type of services
to promote and direct marketing material to disseminate and the establishment of
<PAGE>
a client profile database by the Company will be made or significantly
influenced by Mr. Peroulas. He is presently serving as manager of his own
company and is required to devote a significant amount of time to the conduct of
that company's business. Mr. Peroulas is expected to devote such time and effort
to the business and affairs of the Company as may be necessary to perform their
responsibilities as executive officers of OPI. The loss of the services of Mr.
Peroulas would adversely affect the conduct of the Company's business and its
prospects for the future. The Company presently holds no key-man life insurance
on the life of, and has no employment contract or other agreement with Mr.
Peroulas.
7. No Client Base. The Company was only recently organized. While OPI
intends to engage in the business of providing of graphic arts services the
Company currently has no clients. Further, the very limited funding currently
available to the Company will not permit it to commence business operations in
the industry except on a very limited scale. There can be no assurance that the
debt and/or equity financing, which is expected to be required by the Company in
order for OPI to continue in business after the expiration of the next six(6)to
nine(9)months, will be available. The Company has no clients presently and there
can be no assurance that it will be successful in obtaining clients in its
initial prospective marketing area encompassing Atlanta, Georgia. OPI does not
expect to have long-term contracts with any clients; thus, management believes
that the Company must, in order to survive, ultimately obtain the loyalty of a
large volume of clients. The Company could be expected to experience substantial
difficulty in attracting the high volume of clients in the prospective target
market which would enable OPI to achieve commercial viability. The Company will
be dependent upon Mr. Sam Peroulas, who has approximately two (2) years of
experience in the industry. (See Part I, Item 1. "Description of Business," (b)
"Business of Issuer Business Strategy; and - Sales and Marketing.")
8. High Risks and Unforeseen Costs Associated with OPI's Entry into the
Graphic Arts Services Industry. There can be no assurance that the costs for the
establishment of a client base or for the obtaining of a substantial volume of
services directly with consumers by OPI will not be significantly greater than
those estimated by Company management. Therefore, the Company may expend
significant unanticipated funds or significant funds may be expended by OPI
without development of a commercially viable business. There can be no assurance
that cost overruns will not occur or that such cost overruns will not adversely
affect the Company. Further, unfavorable general economic conditions and/or a
downturn in client confidence could in the futurehave, an adverse affect on
client ability to deliver services which in turn could adversely affect the
Company's business. Additionally, competitive pressures and changes in client
mix, among other things, which management expects the Company to experience in
the uncertain event that it achieves commercial viability, could reduce the
Company's gross profit margin from time to time. Accordingly, there can be no
assurance that OPI will be capable of establishing itself in a commercially
viable position in local, state and nationwide part of the industry. (See Part
I, Item 1. "Description of Business," (b) "Business of Issuer", and
"Seasonality.")
9. Conflict of Interest. There are existing and potential conflicts of
interest, including time, effort and corporate opportunity, involved in the
participation by the Company's executive officer and director in other business
entities and transactions. Mr. Peroulas is the President and manager of his own
company which in part contracts for graphic arts services and which by virtue of
his relation to the Company is an affiliate of the Company. Mr. Peroulas will
divide his time and effort between the Company, his existing employment and his
other business obligations. Accordingly, Mr. Peroulas may become subject to
direct conflicts of interest and the corporate opportunities doctrine with
respect to business opportunities in the business which come to his attention.
The Company's Amended Articles of Incorporation provide that any related party
contract or transaction must be authorized, approved or ratified at a meeting of
the Board of Directors by sufficient vote thereon by directors not interested
therein or the transaction must be fair and reasonable to the Company.
Because of the existing and/or potential future associations of the
Company's executive officer and director in various capacities with other firms
involved in a range of business activities and because of the limited or minimal
amount of time and effort which is expected to be devoted to the Company, there
are existing and potential conflicts of interest in his acting as executive
officer and director of the Company. The executive officer or the director of
the Company will be unable to devote a significant amount of time or effort to
<PAGE>
the business and affairs of the Company because of his simultaneous
participation in, employment by and/or commitments to another firm involved in a
range of business activities. Conflicts of interest and transactions which are
not at arm's-length may arise in the future because the Company's executive
officer and/or director is involved in the management of a company which
transacts business, or competes directly with, the Company. (See Part I, Item 1.
"Description of Business," (b) Business of Issuer - General.")
10. Ability to Grow. The Company expects to grow through internal
growth, by granting franchises and through acquisitions. The Company plans to
expand its business from its current location and by entry into other markets.
There can be no assurance that the Company will be able to create a market
presence, or if such market presence is created, to profitably expand its market
presence or successfully enter other markets. The ability of the Company to grow
will depend on a number of factors, including the availability of working
capital to support such growth, existing and emerging competition and the
Company's ability to maintain sufficient profit margins in the face of an
increasingly competitive industry. The Company must also manage costs in a
changing regulatory environment, adapt its infrastructure and systems to
accommodate growth and recruit and train qualified personnel.
The Company also plans to expand its business, in part, through
acquisitions primarily of independently owned and operated businesses. Although
the Company will continuously review potential acquisition candidates, it has
not entered into any agreement, understanding or commitment with respect to any
acquisitions at this time. There can be no assurance that the Company will be
able to successfully identify suitable acquisition candidates, complete
acquisitions on favorable terms, or at all, or integrate acquired businesses
into its operations. Moreover, there can be no assurance that acquisitions will
not have a material adverse effect on the Company's operating results,
particularly in the fiscal quarters immediately following the consummation of
such transactions, while the operations of the acquired business are being
integrated into the Company's operations. Once integrated, acquisitions may not
achieve comparable levels of revenues, profitability or productivity as at then
existing Company-owned locations or otherwise perform as expected. The Company
is unable to predict whether or when any prospective acquisition candidate will
become available or the likelihood that any acquisitions will be completed. The
Company will be competing for acquisition and expansion opportunities with
entities that have substantially greater resources than the Company. In
addition, acquisitions involve a number of special risks, such as diversion of
management's attention, difficulties in the integration of acquired operations
and retention of personnel, unanticipated problems or legal liabilities, and tax
and accounting issues, some or all of which could have a material adverse effect
on the Company's results of operations and financial condition.
Franchise growth poses the additional risk of the inability of the
Company to control the quality of services provided by its franchise associates.
Moreover, the failure of any franchise associate to pay royalties due to the
Company could have a material adverse effect on the Company's financial
condition and results of operations (See Part I, Item 1. "Description of
Business (b) "Business Strategy.")
At such time as the Company enters into franchise agreements, the
Company may be subject to claims asserting that it is vicariously liable for the
damages allegedly caused by the franchisees. Generally, franchiser liability for
the acts or inactions of its franchisees are based on agency concepts. The
Company intends for its franchise agreements to state that the parties are not
agents and that the franchisees control the day-to-day operations of their
businesses. Furthermore, it is intended that the franchise agreements will
require the franchisees to undertake certain efforts to inform the public that
they are not agents of the Company and that they are independently owned and
operated. Moreover, the Company will take certain additional steps to insulate
its potential liability based on claims from the franchisee's conduct including
requiring the franchisees to indemnify the franchiser for such claims and
mandating that the franchisees carry certain insurance coverage naming the
Company as an additional insured. Despite these efforts to minimize the risk of
vicarious liability, there can be no assurance that a claim will not be made
against the Company, nor that the indemnification requirements and insurance
coverage will be sufficient to cover any judgments, settlements or costs
relating to such a claim.
<PAGE>
11. Competition. The market for graphic art services is highly
competitive. The Company's competitors include local, regional and national
companies, many of which are larger and have greater financial and marketing
resources than the Company. In addition, many of the Company's competitors have
significantly greater name recognition as well as greater marketing, financial
and other resources than the Company. There can be no assurance that the Company
will be able to compete effectively against such competitors in the future. (See
Part I. Item 1."Description of Business," (b) "Business of Issuer-Competition.")
12. Lack of Working Capital Funding Source. The Company expects to
receive payments on its receivables on a timely basis. However, the nature of
the sub-prime lending market will require that the Company plan for a reserve to
be held for non-performing receivables. In the event that such reserve for
non-performing receivables increases substantially the Company's working capital
will be negatively impacted directly impairing operations. In addition, as new
offices are established or acquired, or as the existing office is expanded,
there will be increasing requirements for cash to fund the Company's plans for
expansion. The Company has no current source of working capital funds, and
should the Company be unable to secure additional financing on acceptable terms,
its business, financial condition, results of operations and liquidity would be
materially adversely affected.
13. Absence of Public Market for Shares. The Company's shares of Common
Stock are not registered with the U.S. Securities and Exchange Commission under
the Act. There is no public market for the shares of Common Stock and no
assurance that one will develop. Of such shares, 403,500 thereof are
"free-trading" because of their issuance to persons unaffiliated with OPI
pursuant to an exemption from registration provided by Rule 504 of Regulation D
promulgated under Section 3(b) of the Act. Rule 504 expressly provides that such
shares may be issued without restrictive legend and as such are free-trading.
The balance of 1,650,500 of such shares are "restricted securities." Rule 144 of
the Act provides, in essence, that holders of restricted securities, for a
period of one year after the acquisition thereof from the Company or an
affiliate of the Company, may, every three months, sell to a market maker or in
ordinary brokerage transactions an amount equal to one percent of the Company's
then outstanding securities. Non-affiliates of the Company who hold restricted
securities for a period of two years may sell their securities without regard to
volume limitations or other restrictions. Resales of the free-trading shares of
Common Stock by "affiliates, control persons and/or underwriters" of OPI, as
those terms are defined in the Act, will be subject to the volume limitations,
described in paragraph (e) of Rule 144. Any transfer or resale of the shares of
OPI's Common Stock will be subject, in addition to the Federal securities laws,
to the "blue sky" laws of each state in which such transfer or resale occurs. A
total of 1,650,500 shares of the Company's Common Stock became available for
resale under Rule 144 commencing on May 20, 1999. Sales of shares of Common
Stock under Rule 144 may have a depressive effect on the market price of the
Company's Common Stock, should a public market develop for such stock. Such
sales also might impede future financing by the Company. (See Part I, Item 4.
"Security Ownership of Certain Beneficial Owners and Managers.")
14. No Dividends. While payments of dividends on the Common Stock rests
with the discretion of the Board of Directors, there can be no assurance that
dividends can or will ever be paid. Payment of dividends is contingent upon,
among other things, future earnings, if any, and the financial condition of the
Company, capital requirements, general business conditions and other factors
which cannot now be predicted. It is highly unlikely that cash dividends on the
Common Stock will be paid by the Company in the foreseeable future.
15. No Cumulative Voting. The election of directors and other questions
will be decided by a majority vote. Since cumulative voting is not permitted and
one-third of the Company's outstanding Common Stock constitute a quorum,
investors who purchase shares of the Company's Common Stock may not have the
power to elect even a single director and, as a practical matter, the current
management will continue to effectively control the Company.
16. Control by Present Shareholders. The present shareholders of the
Company's Common Stock will, by virtue of their percentage share ownership and
the lack of cumulative voting, be able to elect the entire Board of Directors,
establish the Company's policies and generally direct its affairs. Accordingly,
persons investing in the Company's Common Stock will have no significant voice
<PAGE>
in Company management, and cannot be assured of ever having representation on
the Board of Directors. (See Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Managers.")
17. Potential Anti-Takeover and Other Effects of Issuance of Preferred
Stock May Be Detrimental to Common Shareholders. Potential Anti-Takeover and
Other Effects of Issuance of Preferred Stock May Be Detrimental to Common
Shareholders. The Company is authorized to issue up to 10,000,000 shares of
preferred stock. $.0001 par value per share (hereinafter referred to as the
"Preferred Stock"); none of which shares has been issued. The issuance of
Preferred Stock does not require approval by the shareholders of the Company's
Common Stock. The Board of Directors, in its sole discretion, has the power to
issue shares of Preferred Stock in one or more series and to establish the
dividend rates and preferences, liquidation preferences, voting rights,
redemption and conversion terms and conditions and any other relative rights and
preferences with respect to any series of Preferred Stock. Holders of Preferred
Stock may have the right to receive dividends, certain preferences in
liquidation and conversion and other rights; any of which rights and preferences
may operate to the detriment of the shareholders of the Company's Common Stock.
Further, the issuance of any shares of Preferred Stock having rights superior to
those of the Company's Common Stock may result in a decrease in the value of
market price of the Common Stock provided a market exists, and additionally,
could be used by the Board of Directors as an anti-takeover measure or device to
prevent a change in control of the Company.
18. No Secondary Trading Exemption. In the event a market develops in
the Company's shares, of which there can be no assurance, secondary trading in
the Common Stock will not be possible in each state until the shares of Common
Stock are qualified for sale under the applicable securities laws of the state
or the Company verifies that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. There can
be no assurance that the Company will be successful in registering or qualifying
the Common Stock for secondary trading, or availing itself of an exemption for
secondary trading in the Common Stock, in any state. If the Company fails to
register or qualify, or obtain or verify an exemption for the secondary trading
of, the Common Stock in any particular state, the shares of Common Stock could
not be offered or sold to, or purchased by, a resident of that state. In the
event that a significant number of states refuse to permit secondary trading in
the Company's Common Stock, a public market for the Common Stock will fail to
develop and the shares could be deprived of any value.
19. Possible Adverse Effect of Penny Stock Regulations on Liquidity of
Common Stock in any Secondary Market. In the event a market develops in the
Company's shares, of which there can be no assurance, then if a secondary
trading market develops in the shares of Common Stock of the Company, of which
there can be no assurance, the Common Stock is expected to come within the
meaning of the term "penny stock" under 17 CAR 240.3a51-1 because such shares
are issued by a small company; are low-priced (under five dollars); and are not
traded on NASDAQ or on a national stock exchange. The Securities and Exchange
Commission has established risk disclosure requirements for broker-dealers
participating in penny stock transactions as part of a system of disclosure and
regulatory oversight for the operation of the penny stock market. Rule 15g-9
under the Securities Exchange Act of 1934, as amended, obligates a broker-dealer
to satisfy special sales practice requirements, including a requirement that it
make an individualized written suitability determination of the purchaser and
receive the purchaser's written consent prior to the transaction. Further, the
Securities Enforcement Remedies and Penny Stock Reform Act of 1990 require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure instrument that provides information about penny
stocks and the risks in the penny stock market. Additionally, the customer must
be provided by the broker-dealer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and the salesperson in the
transaction and monthly account statements showing the market value of each
penny stock held in the customer's account. For so long as the Company's Common
Stock is considered penny stock, the penny stock regulations can be expected to
have an adverse effect on the liquidity of the Common Stock in the secondary
market, if any, which develops.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
<PAGE>
Since its inception, the Company has conducted minimal business
operations except for organizational and capital raising activities. The Company
has not realized any revenues since its inception due to the fact that its key
executive, Mr. Peroulas has committed to complete a project in his current
employment which is scheduled for completion in August 1999. As a result, from
inception (May 20, 1998) through February 1999 the Company has realized only
interest income of $184.00. Total Company operations and operating expenses as
of February 28, 1999 were $8,847. Such operating expenses are primarily an
initial starting cost consisting of legal, accounting and administrative costs.
The Company proposes to engage in providing graphic arts services to individual
and commercial consumers.
If the Company is unable to generate sufficient revenue from operations
to implement its expansion plans, management intends to explore all available
alternatives for debt and/or equity financing, including but not limited to
private and public securities offerings. Depending upon the amount of business
revenue, if any, generated by the Company, management anticipates that it will
be able to satisfy its cash requirements for fund raising and payment of
administrative costs for the next approximately six (6) to nine (9) months
without raising funds via debt and/or equity financing or from third party
funding sources. The Company anticipates the need for a minimum of $500,000 in
business revenues in the next twelve (12) months to satisfy cash requirements
for operating a maximum of four (4) locations. Accordingly, management expects
that it will be necessary for OPI to raise additional funds in the next six(6)
months, if only a minimal level of revenue is generated in accordance with
management's expectations.
Mr. Peroulas, at least initially, will be solely responsible for
developing OPI's business. However, at such time, if ever, as sufficient
operating capital becomes available, management expects to employ additional
staffing and marketing personnel. In addition, the Company expects to
continuously engage in market research in order to monitor new market trends,
seasonality factors and other critical information deemed relevant to OPI's
business.
In addition, at least initially, the Company intends to operate out of
the home of Mr. Peroulas. Thus, it is not anticipated that OPI will lease or
purchase office space or computer equipment in the foreseeable future. OPI may
in the future establish its own facilities and/or acquire computer equipment if
the necessary capital becomes available; however, the Company's financial
condition does not permit management to consider the acquisition of office space
or equipment at this time.
Financial Condition, Capital Resources and Liquidity
At February 28, 1999, the Company had assets totaling $20,177 and
liabilities of $8,500 attributable to accrued professional fees and
organizational expenses. Since the Company's inception, it has received $20,175
in cash contributed as consideration for the issuance of shares of Common Stock.
OPI's working capital is presently minimal and there can be no assurance
that the Company's financial condition will improve. The Company is expected to
continue to have minimal working capital or a working capital deficit as a
result of current liabilities. The Company, at inception, issued 1,650,500
shares of the Company's Common Stock to Mr. Sam Peroulas, executive officer and
director of OPI, for the fair value of services rendered on behalf of the
Company. During May, June & September, 1998, the Company issued and sold an
aggregate of 403,500 shares of Common Stock to Georgia and Florida residents for
cash consideration totaling $20,175. No underwriter was employed in connection
with the offering and sale of the shares. The Company claimed the exemption from
registration in connection with each of the offerings provided under Section
3(b) of the Act and Rule 504 of Regulation D promulgated thereunder, Section
10-5-9(13) of the Georgia Code and Section 517.061(11) of the Florida Code. Even
though management believes, without assurance, that it will obtain sufficient
capital with which to implement its business plan on a limited scale, the
Company is not expected to continue in operation without an infusion of capital.
In order to obtain additional equity financing, management may be required to
dilute the interest of existing shareholders or forego a substantial interest of
<PAGE>
its revenues, if any. (See Part I, Item 1. "Description of Business"; See Part
I, Item 4. "Security Ownership of Certain Beneficial Owners and Managers0" and
Part I, Item 7. "Certain Relationships and Related Transactions.")
The Company has no potential capital resources from any outside sources
at the current time. In its initial phase, the Company will operate out of the
facility provided by Mr. Peroulas. Mr. Peroulas will begin by finding clients
for the Company. To attract clients, Mr. Peroulas will visit potential clients
in order to determine their business needs. The Company will place advertising
in local area newspapers in Atlanta, Georgia to directly solicit prospective
customers. In the event the Company requires additional capital during this
phase, Mr. Peroulas has committed to fund the operation until such time as
additional capital is available. The Company believes that it will require six
(6) to nine (9) months in order to determine the market demand potential.
The ability of the Company to continue as a going concern is dependent
upon its ability to obtain clients who will utilize the Company's programs and
whether the Company can attract an adequate number of direct clients. The
Company believes that in order to be able to expand its initial operations, it
must rent offices in Atlanta, Georgia, hire clerical staff and acquire through
purchase or lease computer and office equipment to maintain accurate financial
accounting and client data. The Company believes that there is adequate and
affordable rental space available in Atlanta, Georgia and sufficiently trained
personnel to provide such clerical services at affordable rates. Further, the
Company believes that the type of equipment necessary for the operation is
readily accessible at competitive rates. Such costs for a ninety (90) day period
are estimated to approximate $7-8,000.
To implement such plan, also during this initial phase, the Company
intends to initiate a self- directed private placement under Rule 506 in order
to raise an additional $100,000. The Company expects to accomplish its fund
raising objective before January 1, 2000. No underwriters have been contacted
and no known investors have been contacted with respect to such fund raising. In
the event such placement is successful, the Company believes that it will have
sufficient operating capital to meet the initial expansion goals and operating
costs for a period of one (1) year. In the event the Company is not successful
in raising such funds, the Company believes that it will not be able to continue
operations past a period of six (6) to nine(9) months.
Net Operating Losses
The Company has net operating loss carry-forwards of $8,663 expiring at
February 28, 2019. The company has a $1,704 deferred tax asset resulting from
the loss carry-forwards, for which it has established a 100% valuation
allowance. Until the Company's current operations begin to produce earnings, it
is unclear as to the ability of the Company to utilize such carry-forwards.
Year 2000 Compliance
The Company is currently in the process of evaluating its information
technology for Year 2000 compliance. The Company does not expect that the cost
to modify its information technology infrastructure to be Year 2000 compliant
will be material to its financial condition or results of operations. The
Company does not anticipate any material disruption in its operations as a
result of any failure by the Company to be in compliance.
The Company does not have any computer systems and does not anticipate
use of any equipment other than a basic computer which will be Year 2000
compliant. Additional systems will consist of manual filing and handwritten
records. Communications with vendors, suppliers, financial institutions and
customers will be via telephone and mail, and worst case will be by personal
contact. The Company does not anticipate future costs for Year 2000 compliance.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-SB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
<PAGE>
future capital expenditures (including the amount and nature thereof), business
strategy, expansion and growth of the Company's business and operations, and
other such matters are forward-looking statements. These statements are based on
certain assumptions and analyses made by the Company in light of its experience
and its perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results or developments will conform with
the Company's expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulation; and other factors, most of which are
beyond the control of the Company. Consequently, all of the forward-looking
statements made in this Form 10-SB are qualified by these cautionary statements
and there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially realized,
that they will have the expected consequence to or effects on the Company or its
business or operations. The Company assumes no obligations to update any such
forward-looking statements.
The "safe harbor" for forward looking information only applies to
statements made by companies that are already subject to the reporting
requirements of Section 13(a) or Section 15(d) of the Exchange Act. Until such
time as the Company is a reporting company, the safe harbor provisions do not
apply to the Company.
Item 3. Description of Property:
The Company's executive offices are located at 222 Lakeview Avenue,
Suite 113, West Palm Beach, Florida 33401. Its telephone number is (404)
321-1192. The Company pays no rent for this space. The Company owns no real or
personal property.
Item 4. Security Ownership of Certain Beneficial Owners and Managers
The following table sets forth information as of February 28, 1999,
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five per cent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the shares of Common Stock
beneficially owned.
Amount
Name and Address of Beneficially Percent of
Beneficial Owner Owned Class (1)
---------------- ----- ---------
Sam Peroulas (2)(3) 1,650,500 80.35 %
1506 Briarhill Lane NE
Atlanta, Georgia 30324
All Executive Officers, Directors 1,650,500 80.35 %
- -------------------
(1) Based upon 2,054,000 shares of the Company's Common Stock issued and
outstanding as of February 28, 1999.
(2) Sole Executive and Director of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons; Compliance
Executive Officers and Directors
Set forth below are the names, ages, positions with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
- ------ --- ------------------------
Sam Peroulas 33 President, Secretary, Chief Executive
Officer & Director
<PAGE>
Directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board. Mr. Peroulas will devote such time and
effort to the business and affairs of the Company as may be necessary to perform
his responsibilities as executive officer and/or director of the Company.
Aside from the above officer and director, there are no other persons
whose activities will be material to the operations of the Company at this time.
Mr. Peroulas is the sole "promoter" of the Company as such term is defined under
the Act.
Family Relationships
There are no family relationships between or among the executive officer
and director of the Company.
Business Experience
Sam Peroulas has served as the sole Executive of the Company since its
inception(May 20, 1998).
Mr. Sam Peroulas has served since the Company's inception (May 20, 1997)
as its sole executive officer and director. He attended Emory University from
1987 to 1991 where he received a BS in Biology and Philosophy as well as a minor
in graphic arts design. Mr. Peroulas subsequently attended Georgia State
University from 1993 to 1997 where he received an MS in Microbiology. Since 1997
Mr. Peroulas has been a Certified Microbiologist by the American Academy of
Microbiology. Since 1991 to date (either full time or part time depending on
school demands) Mr. Peroulas has consulted and free-lanced as a graphic artist
and microbiologist. He has extensive experience in computer graphic modeling for
biological application and brings key graphic art skills to the Company. His
work as a graphic artist and specifically his work as a graphic arts
microbiologist will attract both commercial and individual consumers in the
field of microbiology and other areas.
Compliance with Section 16(a) of the Securities Exchange Act of 1934:
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission (hereinafter referred to as the "Commission")
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership, of Common Stock and other equity
securities of the Company on Forms 3, 4 and 5, respectively. Executive officers,
directors and greater than 10% shareholders are required by Commission
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, Mr. Peroulas comprises all of the Company's
executive officers, directors and greater than 10% beneficial owners of its
common Stock, and has complied with Section 16(a) filing requirements applicable
to him during the Company's fiscal year ended April 30, 1999 up to the third
quarter ended January 31, 1999.
Item 6. Executive Compensation:
The Company, in consideration for various services performed for the
Company, issued to Mr. Sam Peroulas, the Company's sole executive officer and/or
director 1,650,500 shares of restricted common stock. Except for the
above-described compensation, it is not anticipated that any executive officer
of the Company will receive any cash or non-cash compensation for his or her
services in all capacities to the Company until such time as the Company
commences business operations. At such time as OPI commences operations, it is
expected that the Board of Directors will approve the payment of salaries in a
reasonable amount to each of its officers for their services in the positions of
President/Treasurer, Executive Vice President and Secretary respectively, of the
Company. At such time, the Board of Directors may, in its discretion, approve
the payment of additional cash or non-cash compensation to the foregoing for
their services to the Company.
<PAGE>
The Company does not provide officers with pension, stock appreciation
rights, long-term incentive or other plans but has the intention of implementing
such plans in the future.
Compensation of Directors
The Company has no standard arrangements for compensating the directors
of the Company for their attendance at meetings of the Board of Directors.
Item 7. Certain Relationships and Related Transactions:
On May 20, 1998, at inception, the Company issued 1,650,500 shares of
restricted Common Stock to Mr. Sam Peroulas, the President and Treasurer of the
Company and record and beneficial owner of approximately 80.35 % of the
Company's outstanding Common Stock, in consideration and exchange therefore for
services in connection with the organization of OPI performed for the Company by
him.
At the current time, the Company has no provision to issue any
additional securities to management, promoters or their respective affiliates or
associates. At such time as the Board of Directors adopts an employee stock
option or pension plan, any issuance would be in accordance with the terms
thereof and proper approval. Although the Company has a very large amount of
authorized but unissued Common Stock and Preferred Stock which may be issued
without further shareholder approval or notice, the Company intends to reserve
such stock for the Rule 506 offerings contemplated to implement continued
expansion, for acquisitions and for properly approved employee compensation at
such time as such plan is adopted. (See Part I, Item 1. "Description of Business
- - (b) Business of Issuer.")
Item 8. Description of Securities.
The Company is authorized to issue 50,000,000 shares of Common
Stock, $0.0001 par value. The issued and outstanding shares of Common Stock
being registered hereby are validly issued, fully paid and non-assessable. The
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets legally available therefor at such times and in such amounts as
the Board of Directors may from time to time determine.
All shares of Common Stock have equal voting rights and, when
validly issued and outstanding, have one vote per share in all matters to be
voted upon by the stockholders. A majority vote is required on all corporate
action. Cumulative voting in the election of directors is not allowed, which
means that the holders of more than 50% of the outstanding shares can elect all
the directors as they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any directors. The shares of Common
Stock have no preemptive, subscription, conversion or redemption rights and can
only be issued as fully paid and non-assessable shares. Upon liquidation,
dissolution or winding-up of the Company, the holders of Common Stock are
entitled to receive a pro rata of the assets of the Company which are legally
available for distribution to stockholders.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of Preferred
Stock, $0.0001 par value. Currently there are no issued and outstanding
preferred shares of the Company.
Transfer Agent
The company will serve as its transfer agent until it is eligible for
quotation on the OTC: Bulletin Board.
Certain Provision of Florida Law.
Section 607.0902 of the Florida Business Corporation Act prohibits the
voting of shares in a publicly-held Florida corporation that are acquired in a
"control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
<PAGE>
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition or
unless the acquisition of incorporation or bylaws specifically state that this
section does not apply. A "control share acquisition" is defined as an
acquisition that immediately thereafter entitles the acquiring party to vote in
the election of directors within each of the following ranges of voting power:
(i) one-fifth or more, but less than one-third of such voting power: (ii)
one-third or more, but less than a majority of such voting power; and, (iii)
more than a majority of such voting power. The Amended Articles of Incorporation
of the Company specifically state that Section 607.0902 does not apply to
control-share acquisitions of shares of the Company.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
No matter was submitted during the Third Quarter of the fiscal year ended
April 30, 1999, covered by this report to a vote of the Company's shareholders,
through the solicitation of proxies or otherwise.
(a) Market Information.
There has been no established public trading market for the Common Stock
since the Company's inception on May 20, 1998.
(b) Holders.
As of February 28, 1998, the Company had 19 shareholders of record of its
2,054,000 outstanding shares of Common Stock.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Item 2. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company
Item 3. Changes In and Disagreements with Accountants
Because the Company has been generally inactive since its inception, it has
had no independent accountant until the retention in July 1998 of Durland and
Company, CPA's, P.A., 340 Royal Palm Way, Suite 204, Palm Beach, Florida 33480.
There has been no change in the Company's independent accountant during the
period commencing with the Company's retention of Durland and Company, CPA's,
P.A. through the date hereof.
Item 4. Recent Sales of Unregistered Securities
On May 20, 1998, the Company issued 1,650,500 shares of restricted Common
Stock to Mr. Sam Peroulas, the President and Treasurer of the Company and record
and beneficial owner of approximately 80.35% of the Company's outstanding Common
Stock, in consideration and exchange therefore for services in connection with
the organization of OPI performed for the Company by him.
During May, June & September 1998, the Company issued and sold an aggregate
of 403,500 shares of Common Stock to Georgia and Florida residents for cash
consideration totaling $20,175.(60,000 shares to Fifteen (15) Georgia residents
and 343,500 shares to four (4) Florida residents). No underwriter was employed
in connection with the offering and sale of the shares. The Company claimed the
<PAGE>
exemption from registration in connection with each of the offerings provided
under Section 3(b) of the Act and Rule 504 of Regulation D promulgated
thereunder, Section 10-5- 9(13) of the Georgia Code and Section 517.061(11) of
the Florida Code.
The facts relied upon the by the Company to make the federal exemption
available include the following: (i) the aggregate offering price for the
offering of the shares of Common Stock did not exceed $1,000,000, less the
aggregate offering price for all securities sold within the twelve months before
the start of and during the offering of the shares in reliance on any exemption
under Section 3(b) of, or in violation of Section 5(a) of, the Act; (ii) no
general solicitation or advertising was conducted by the Company in connection
with the offering of any of the shares; (iii) the fact that the Company has not
been since its inception (a) subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended; (b) an "investment
Company" within the meaning of the Investment Company Act of 1940, as amended;
or (c) a development stage Company that either has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company or companies, or other entity or
person; and (iv) the required number of manually executed originals and true
copies of Form D were duly and timely filed with the U.S. Securities and
Exchange Commission.
The facts relied upon to make the Georgia Exemption available include
the following: (i) the aggregate number of persons purchasing the Company's
stock during the 12 month period ending on the date of issuance did not exceed
fifteen (15) persons; (ii) neither the offer nor the sale of any of the shares
was accomplished by a public solicitation or advertisement; (iii) each
certificate contains a legend stating "These securities have been issued or sold
in reliance of paragraph (13) of Code Section 10-5-9 of the Georgia Securities
Act of 1973 and may not be sold or transferred except in a transaction which is
exempt under such act or pursuant to an effective registration under such act";
and (iv) each purchaser executed a statement to the effect that the securities
purchased have been purchased for investment purposes. Offerings made pursuant
to this section of the Georgia Securities Act have no requirement for an
offering memorandum or disclosure document.
The facts relied upon to make the Florida exemption available include
the following: (i) sales of the shares of Common Stock were not made to more
than 35 persons; (ii) neither the offer nor the sale of any of the shares was
accomplished by the publication of any advertisement; (iii) all purchasers
either had a preexisting personal or business relationship with one or more of
the executive officers of OPI or, by reason of their business or financial
experience, could be reasonably assumed to have the capacity to protect their
own interests in connection with the transaction; (iv) each purchaser
represented that he was purchasing for his own account and not with a view to or
for sale in connection with any distribution of the shares; and (v) prior to
sale, each purchaser had reasonable access to or was furnished all material
books and records of the Company, all material contracts and documents relating
to the proposed transaction, and had an opportunity to question the executive
officers of the Company. Pursuant to Rule 3E-500.005, in offerings made under
Section 517.061(11) of the Florida Statutes, an offering memorandum is not
required; however each purchaser (or his representative) must be provided with
or given reasonable access to full and fair disclosure of material information.
An issuer is deemed to be satisfied if such purchaser or his representative has
been given access to all material books and records of the issuer; all material
contracts and documents relating to the proposed transaction; and an opportunity
to question the appropriate executive officer. In the regard, Mr. Peroulas
supplied such information and was available for such questioning.
Item 5. Indemnification of Directors and Officers.
Article X of the Company's Articles of Incorporation contains provisions
providing for the indemnification of directors and officers of the Company as
follows:
(a) The corporation shall indemnify any person who was or is a party, or
is threatened to be made a party, of any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is otherwise serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise, against expenses (including attorneys'
<PAGE>
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe his conduct is unlawful. The
termination of any action, suit or proceeding, by judgment, order, settlement,
conviction upon a plea of nolo contendere or its equivalent, shall not of itself
create a presumption that the person did not act in good faith in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe the action was unlawful.
(b) The corporation shall indemnify any person who was or is a party, or
is threatened to be made a party, to any threatened, pending or completed action
or suit by or in the right of the corporation, to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in, or not, opposed to, the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation, unless, and only to the extent that, the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the officer, director
and employee or agent is proper in the circumstances, because he has met the
applicable standard of conduct set forth in Section (a) or (b) of this Article.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in advance
of the final disposition or such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
(f) The Board of Directors may exercise the corporation's power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Amended Articles of Incorporation, the Bylaws, agreements,
vote of the shareholders or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding
<PAGE>
such office and shall continue as to person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs and
personal representative of such a person.
The Company has no agreements with any of its directors or executive
offices providing for indemnification of any such persons with respect to
liability arising out of their capacity or status as officers and directors.
At present, there is no pending litigation or proceeding involving a
director or executive officer of the Company as to which indemnification is
being sought.
PART F/S
The Financial Statements of OPI required by Item 310 of
Regulation SB commence on page F-1 hereof in response to Part F/S of this
Registration Statement on Form 10- SB and are incorporated herein by this
reference.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report...............................................F-2
Balance Sheets.............................................................F-3
Statements of Loss.........................................................F-4
Statements of Changes in Stockholders' Equity..............................F-5
Statements of Cash Flows...................................................F-6
Notes to Financial Statements..............................................F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO: The Board of Directors
Orange Productions, Inc.
Palm Beach, Florida
We have audited the accompanying balance sheet of Orange Productions, Inc., a
development stage enterprise, as of February 28, 1999 and the related statements
of loss, changes in stockholders' equity and cash flows for the period from May
20, 1998 (Inception) through February 28, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Orange Productions, Inc. as of
February 28, 1999 and the results of its operations and its cash flows for the
period from May 20, 1998 (Inception) through February 28, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has experienced a loss since inception. The
Company's financial position and operating results raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 5. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Durland & Company
Durland & Company, CPAs, P.A.
Palm Beach, Florida
April 9, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
Orange Productions, Inc.
(A Development Stage Enterprise)
Balance Sheets
<S> <C> <C>
May 31, 1999 February 28, 1999
(unaudited)
----------------- ---------------
ASSETS
CURRENT ASSETS
Cash $ 19,861 $ 9,993
Loan and accrued interest receivable 0 10,184
----------------- ---------------
Total current assets 19,861 20,177
----------------- ---------------
Total Assets $ 19,861 $ 20,177
================= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 4,500 $ 4,500
Accrued expenses - related party 4,000 4,000
----------------- ---------------
Total current liabilities 8,500 8,500
----------------- ---------------
Total Liabilities 8,500 8,500
----------------- ---------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value, authorized 10,000,000
shares: none issued 0 0
Common stock, $0.0001 par value, authorized 50,000,000
shares: 2,054,000 issued and outstanding 206 206
Additional paid-in capital 20,134 20,134
Deficit accumulated during the development stage (8,979) (8,663)
----------------- ---------------
Total Stockholders' Equity 11,361 11,677
----------------- ---------------
Total Liabilities and Stockholders' Equity $ 19,861 $ 20,177
================= ===============
</TABLE>
The accompanying notes are an integral part of the financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Orange Productions, Inc.
(A Development Stage Enterprise)
Statements of Loss
<S> <C> <C> <C> <C>
From inception
(May 20, 1998)
through
May 31, 1999 May 31, 1998 February 28, 1999 May 31, 1999
(unaudited) (unaudited) (unaudited)
--------------- --------------- ---------------- ---------------
Revenues $ 0 $ 0 $ 0 $ 0
--------------- --------------- ---------------- ---------------
Expenses
Bank charges 0 0 15 15
Consulting fees - related party 0 0 1,165 1,165
Organization expenses 384 165 167 551
Professional fees 0 0 4,500 4,500
Professional fees - related party 0 0 3,000 3,000
--------------- --------------- ---------------- ---------------
Total expenses 384 165 8,847 9,231
--------------- --------------- ---------------- ---------------
Loss from operations (384) (165) (8,847) (9,231)
Other income (expense)
Interest income 68 0 184 252
--------------- --------------- ---------------- ---------------
Net loss $ (316)$ (165) $ (8,663) $ (8,979)
=============== =============== ================ ===============
Net loss per weighted average share, basic $ (.0002)$ (.0001) $ (.005) $ (.005)
=============== =============== ================ ===============
Weighted average number of shares $ 2,054,000 $ 1,650,500 $ 1,916,576 $ 1,950,201
=============== =============== ================ ===============
</TABLE>
The accompanying notes are an integral part of the financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Orange Productions, Inc.
(A Development Stage Enterprise)
Statements of Changes in Stockholders' Equity
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During the Total
Number of Preferred Common Paid-in Development Stockholders'
Shares Stock Stock Capital Stage Equity
--------- ---------- -------- ---------- ----------- -----------
BEGINNING BALANCE, May 20, 1998 (Inception) 0 $ 0 $ 0 $ 0 $ 0 $ 0
May 1998 - services ($0.0001/sh) 1,650,500 0 165 0 0 165
May 1998 - cash ($0.05/sh) 4,000 0 1 199 0 200
June 1998 - cash ($0.05/sh) 56,000 0 6 2,794 0 2,800
September 1998 - cash ($0.05/sh) 343,500 0 34 17,141 0 17,175
Net loss 0 0 0 0 (8,663) (8,663)
--------- ----------- ------- ---------- ----------- -----------
BALANCE, February 28, 1999 2,054,000 $ 0 $ 206 $ 20,134 $ (8,663) $ 11,677
--------- ----------- ------- ---------- ----------- -----------
For the three months ended May 31, 1999
(Unaudited)
Net loss 0 0 0 0 (316) (316)
--------- ----------- ------- ---------- ----------- -----------
BALANCE, May 31, 1999 (unaudited) 2,054,000 $ 0 $ 206 $ 20,134 $ (8,979) $ 11,361
========= =========== ======= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Orange Productions, Inc.
(A Development Stage Enterprise)
Statements of Cash Flows
<S> <C> <C> <C> <C>
From inception
(May 20, 1998)
May 31, May 31, February 28, through
1999 1998 1999 May 31, 1999
(unaudited) (unaudited) (unaudited)
---------- ----------- -------------- -------------
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
Net loss $ (316) $ (165) $ (8,663) (8,979)
Adjustments to reconcile net loss to net cash used by
development activities:
Stock issued in lieu of cash - related party 0 165 165 165
Changes in assets and liabilities 0 0 0 0
Increase (decrease) in accrued interest receivable 184 0 (184) 0
Increase in accrued expenses 0 0 4,500 4,500
Increase in accrued expenses - related party 0 0 4,000 4,000
---------- ----------- ------------ ---------------
Net cash used by development activities (132) 0 (182) (314)
---------- ----------- ------------ ---------------
CASH FLOW FROM INVESTING ACTIVITIES:
Increase in issuance of loan receivable 0 0 (10,000) (10,000)
Proceeds from repayment of loan receivable 10,000 0 0 10,000
---------- ----------- ------------ ---------------
Net cash used by investing activities 10,000 0 (10,000) 0
---------- ----------- ------------ ---------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 200 20,175 20,175
---------- ----------- ------------- ---------------
Net cash provided by financing activities 0 200 20,175 20,175
---------- ----------- ------------- ---------------
Net increase in cash 9,868 200 9,993 19,861
CASH, beginning of period 9,993 0 0 0
---------- ----------- ------------ ---------------
CASH, end of period $ 19,861 $ 200 $ 9,993 $ 19,861
========== =========== ============ ===============
</TABLE>
The accompanying notes are an integral part of the financial
statements.
F-6
<PAGE>
Orange Productions, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
(Information with respect to the periods
ended May 31, 1999 and 1998 is unaudited)
(1) Summary of Significant Accounting Principles
The Company Orange Productions, Inc. is a Florida chartered development
stage corporation which conducts business from its headquarters in Palm
Beach, Florida. The Company was incorporated on May 20, 1998, and has
elected February 28 as its fiscal year end.
The Company has not yet engaged in its expected operations. The
Company's future operations will be to provide graphic art services to
various consumer groups. Current activities include raising additional
equity and negotiating with potential key personnel and facilities.
There is no assurance that any benefit will result from such activities.
The Company will not receive any operating revenues until the
commencement of operations, but will nevertheless continue to incur
expenses until then.
The financial statements have been prepared in conformity with generally
accepted accounting principles. The financial statements for the three
months ended May 31, 1999 and 1998 include all adjustments which in the
opinion of management are necessary for fair presentation. In preparing
the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
as of the date of the statements of financial condition and revenues and
expenses for the period then ended. Actual results may differ
significantly from those estimates.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Start-up costs Costs of start-up activities, including organization
costs, are expensed as incurred, in accordance with Statement of
Position (SOP) 98-5.
b) Net loss per share Basic is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period.
(2) Loan Receivable The Company authorized a loan in the amount of $10,000
at the rate of 7% per year, payable on demand. Interest of $184 was
accrued at February 28, 1999. The loan principal and accrued interest
were paid in full during March 1999.
(3) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.0001 par value common stock and 10,000,000 shares of $0.0001 par
value preferred stock. The Company had 2,054,000 shares of common stock
issued and outstanding at May 31, 1999. The Company, on May 20, 1998,
issued 1,650,500 restricted, under Rule 144, founders shares to its
Officers and Directors for the value of services rendered in connection
with the organization of the Company. In May, 1998, the Company issued
4,000 shares at $0.05 per share for $200 in cash. In June 1998, the
Company issued 56,000 shares of common stock at $0.05 per share for
$2,800 in cash. In September 1998, the Company issued 343,500 shares at
$0.05 per share for $17,175 in cash.
The Company had no shares of preferred stock issued and outstanding at
May 31, 1999.
(4) Income Taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax
and financial reporting purposes. The Company has net operating loss
carryforwards for income tax purposes of approximately $8,979, $8,663
expiring in 2019 and $316 expiring in 2020 .
The amount recorded as deferred tax assets as of May 31, 1999 is $1,594,
which represents the amount of tax benefit of the loss carryforward. The
Company has established a 100% valuation allowance against this deferred
tax asset, as the Company has no history of profitable operations.
F-7
<PAGE>
Orange Productions, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
(5) Going Concern As shown in the accompanying financial statements, the
Company incurred a net loss of $8,979 for the period from May 20, 1998
(Inception) through May 31, 1999. The ability of the Company to continue
as a going concern is dependent upon commencing operations and obtaining
additional capital and financing. The financial statements do not
include any adjustments that might be necessary if the Company is unable
to continue as a going concern. The Company is currently seeking
financing to allow it to begin its planned operations.
(6) Related Parties
Counsel to the Company indirectly owns 114,500 shares of the Company
through the 100% sole ownership of the common stock of another company
that has invested in the Company. The Company's President, Secretary,
Treasurer and Director directly owns an 80.36% interest in the Company,
consisting of 1,650,500 shares
As of May 31, 1999 and February 28, 1999, the Company owed legal counsel
for services performed during the year in the amount of $3,000, and owed
the former Vice President and former Director of the Company $1,000 for
consulting services rendered. These amounts are presented in Accrued
expenses - related party.
(7) Recently Released Accounting Pronouncements There are no recently
released Statements of Financial Accounting Standards, (SFAS), which,
when adopted, will have an effect on the Company's financial statements
or presentation thereof.
F-8
<PAGE>
Part III
Item 1. Index to Exhibits
3(i).1 Articles of Incorporation of Orange Productions, Inc., effective
May 20, 1998 (filed with original 10SB on 6/23/99)
3(ii).1 Bylaws of Orange Productions, Inc.
(filed with original 10SB on 6/23/99)
27.1 Financial Data Schedule
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ORANGE PRODUCTIONS, INC..
(Registrant)
Date: 20 September 1999 /s/ Sam Peroulas
------------------
Sam Peroulas, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date Signature Title
---- --------- -----
20 September 1999 By:/s/ Sam Peroulas President & Director
-------------------
Sam Peroulas
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