UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to _______________
Commission File No. ___________
ORIGIN INVESTMENT GROUP, INC.
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(Exact name of registrant as specified in its charter)
Maryland 36-4286069
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
980 North Michigan Avenue, Suite 1400, Chicago, Illinois 60611
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(Address of principal executive offices) (Zip Code)
(312) 988-4836
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
has been required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
The registrant has shares of common stock outstanding as of May __, 2000.
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ORIGIN INVESTMENT GROUP, INC.
(A Development Stage Company)
BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash $ 652,632
Total Current Assets $ 652,632
---------------
Property and Equipment:
Office Equipment $ 4,211
Less: accumulated depreciation 798
Remaining Balance: $ 3,422
Total Assets: $ 656,054
---------------
LIABILITIES
Current Liabilities:
Accounts Payable $ 98,703
Total Current Liabilities $ 98,703
---------------
STOCKHOLDER'S EQUITY
Common Stock
$.001 par value, 4,121,390 shares $ 4,121
authorized, issued and outstanding
Paid in capital $ 1,478,511
Less: Subscription receivable (198,000)
Deficit accumulated during development stage (727,160)
Total Stockholder's Equity $ 557,472
---------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
ORIGIN INVESTMENT GROUP, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Amount
---------------
<S> <C>
Interest Income 111
Operating Expenses % 521,843
Net (loss) $ (521,732)
(Deficit): beginning of period $ (208,429)
(Deficit): end of period $ (727,161)
---------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
ORIGIN INVESTMENT GROUP, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
<S> <C>
Cash provided (applied):
Operating activities:
Net loss $ (521,731)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation $ 400
Decrease in miscellaneous receivable 4,250
Decrease in advances to officer 12,103
Decrease in prepaid expenses 33,550
Increase in accounts payable 40,640
TOTAL FROM OPERATING ACTIVITIES $ (430,788)
---------------
Financing activities
Proceeds from common stock/Series A Preferred issuances $ 1,082,511
---------------
TOTAL FROM FINANCING ACTIVITIES $ 1,082,511
---------------
Increase in cash $ 651,723
Cash balance, beginning of period $ 908
Cash balance, end of period $ 652,631
---------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
ORIGIN INVESTMENT GROUP, INC.
(A Development Stage Company)
Schedule I - Operating Expenses
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Amount
---------------
<S> <C>
Accounting fees 42,530
Acquisition costs 200,000
Bank fees 946
Business Identity 1,163
Depreciation 400
Dues and Subscriptions 150
Escrow Agent Fee 2,500
Internet Access 356
Investor relations service 28,000
Legal Fees 58,888
Local Transportation 2,814
Meals and entertainment 36,315
Office cleaning 240
Office expense 806
Parking 109
Postage & delivery 2,941
Press Releases 3,060
Printing 2,287
Professional development 6,061
Rent 18,639
Salaries to Officers 47,369
Software 1,070
Telephone 5,088
Transfer Agent 233
Travel 59,267
Travel agent fee 405
Utilities 207
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TOTAL 521,843
==========
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
</TABLE>
<PAGE>
ORIGIN INVESTMENT GROUP, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
reflect the results of operations for Origin Investment Group, Inc. and have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals and adjustments) considered necessary
for a fair presentation have been included. Operating results for the
three-month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Origin's Annual Report on Form 10-K for the year ended
December 31, 1999 filed with the Securities and Exchange Commission (SEC) on May
4, 2000.
Origin Investment Group, Inc. is a Maryland corporation headquartered in
Chicago, Illinois. The Company is a start up stage business development company
which provides investment capital and managerial assistance to companies that
can be classified as eligible portfolio companies under the Investment Company
Act of 1940. Origin is currently in the development stage and has made no
investments to date.
The Company has experienced net losses since its inception and has had no
revenues or income since incorporation. The Company has an accumulated deficit
of $727,161 for the period ended March 31, 2000. Such losses are attributable to
cash losses incurred in the development of the Company's infrastructure and
operations. The Company expects operating losses to continue for the foreseeable
future as it continues to develop its business plan of identifying and investing
within eligible portfolio companies which meet its investment criteria.
2. CASH IN ESCROW ACCOUNT
The Company has placed $638,762 of its available cash into an escrow
account which is to be only released to the Company upon reaching an aggregate
sum of $2,650,000 prior to the closing of the Encore/Sigma transaction on May
16, 2000. As of the date of this quarterly report, the closing of Encore/Sigma
transaction had not occurred.
3. RELATED PARTY TRANSACTIONS
The Company paid $18,888 for legal fees to Rizvi & Associates, LLP, a law
firm managed by Mr. Omar A. Rizvi, an officer and director of the Company.
Accordingly, this transaction cannot be construed as occurring at arms length.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Except for historical information, the following discussion of our financial
condition and results of operations contains forward looking statements based on
current expectations that involve certain risks and uncertainties. Our actual
results could differ materially from those set forth in these forward-looking
statements as a result of a number of factors. Unless specified otherwise, the
terms, "we", "us", "our", "the company", and "Origin" refer to Origin Investment
Group, Inc.
Overview
We are a business development company incorporated in the State of Maryland on
April 6, 1999. We are in the start up stage and we have not had any revenues to
date and we have not made any investments. Thus far, our operations have
primarily been limited to:
A) completing our due diligence investigation and financial audit of two
eligible portfolio companies that we have identified: Encore
Investment, Inc. and Sigma Solutions, Inc.;
B) initiating discussions with several e-business solutions companies,
systems integrators and value-added resellers for possible future
investment and to become our future eligible portfolio companies: and
C) negotiating with several venture capital funds, investment funds,
accredited investor groups and individual accredited investors in
connection with raising capital through the sale of our equity
securities.
Liquidity and Capital Resources
Since our inception, we have funded our operations solely through payments
received from the sale of our equity securities. Our current liquidity and
capital resources are contingent on our ability to continue to fund our
operations through the sale of our equity securities. If we are unsuccessful in
continuing to raise capital through the sale of our securities, we will have
difficulty in meeting our short term obligations and may cease to continue as a
going concern. Our ability to sell our equity securities to fund operations and
to make investments within identified eligible portfolio companies, in large
part, is contingent upon the depth and liquidity of our secondary market of our
common stock.
At the time of this quarterly report, we have been conducting an offering of
16,000 shares of Series A Convertible Preferred Stock for an aggregate offering
price of $4,600,000, or $287.50 per share of Series A Convertible Preferred
Stock, available only to accredited investors. The Series A Convertible
Preferred Stock converts into common stock in stages occurring at one month
intervals over a 10-month period. Ten percent of the outstanding shares of the
Series A Convertible Preferred Stock will automatically convert into Origin
common stock on the 15th of every month beginning in April 2000 and ending in
January 2001. Each share will convert into 100 shares of free-trading common
stock. The conversions will occur on a pro rata basis so that 10% of each
holder's shares will convert each month. Holders of Series A Convertible
Preferred Stock will pay no additional consideration for the conversion into
common stock. The funds we receive from this offering are to be placed in an
escrow account to be released to us once a total of $2,650,000 has been
deposited into this escrow account. In the event the funds deposited do not
reach $2,650,000 on or before the closing date of the Encore/Sigma transaction
(described in Item 1 above), we will direct the escrow agent to return these
funds to the original investors. The offering is being conducted according to
the terms of Regulation E, making the shares of preferred stock and the shares
of common stock underlying the preferred stock exempt from registration under
the Securities Act.
In addition to the current offering of Series A Convertible Preferred Stock, we
are offering restricted stock to persons who invest in that offering. Investors
in the Series A Preferred offering are being offered one additional restricted
common share for every $10 they invest in the Series A Preferred offering if
they will agree not to deposit their funds into the escrow account and allow us
to use their funds for current working capital. For example, an investor who
purchases 200 Series A Preferred shares and agrees to put his investment at risk
to be used as working capital will receive an additional 5,750 shares of
restricted common stock. The total shares of common stock to be received by that
investor would be 20,000 free-trading shares to be received through conversion
of his preferred shares, and 5,750 restricted shares issued on the date of
investment.
As of May 22, 2000, 3069.609 shares of Series A Convertible Preferred Stock had
been sold for an aggregate amount of $882,512.50. Of this amount, $638,762.50
was deposited into our escrow account and the remainder was deposited into our
checking account to be used for working capital and to pay a $200,0000
deposit/break up fee for the Encore/Sigma transaction . Because the total amount
deposited into the escrow account did not reach $2,650,000 on or before the
closing date of the Encore/Sigma transaction (described in Item 1 of our Form
10-K, incorporated by reference herein), the funds are required to be returned
to the original investors of these funds. As of the date of this quarterly
report, we have not returned these funds to the original investors nor have any
Series A Convertible Preferred investors received any converted common shares
due on April 15, 2000 and May 15, 2000. We currently are revising our pricing
and conversion structure of the Series A Convertible Preferred Stock and will
amend the offering circular associated with this offering to reflect these
changes. It is anticipated that because the market price of our common stock has
declined considerably since we began the offering of our Series A stock, these
adjustments to the price and conversion structure will be substantially more
dilutive than previously anticipated. We have contacted each Series A Stock
accredited investor and have indicated that we will offer each such investor a
revised pricing and conversion structure based on the current market price, no
later than by May 31, 2000. In addition, those investors whose funds were
deposited into the escrow account will have the option to have their funds
returned, should they elect not to participate in the revised and amended Series
A Convertible Preferred stock offering.
In addition to the Series A Convertible Preferred offering, we sold 50,000
shares of restricted common stock to an investor on April 14, 2000 for
$50,000.00 This investor was also personally known to Origin officers. These
shares are restricted from resale pursuant to Rule 144 of the Securities Act of
1933.
The Company paid $18,888 in legal fees to Rizvi & Associates, LLP, a law firm
which is managed by Mr. Omar A. Rizvi, an officer and director, in connection
with legal services performed on behalf of the Company with respect to the
Encore/Sigma transaction. We also paid Holleb & Coff, LLP, a law firm located in
Chicago, Illinois a retainer in the amount of $40,000.00 in connection with
corporate legal services including preparation of our annual report for fiscal
year 1999 and in connection with the Encore/Sigma transaction.
Results of Operations
On May 1, 2000, we entered into an agreement to pay $53,000.00 and executed a
note for such amount in favor of Mr. Chris Gardner for consulting services
rendered by Mr. Gardner which included a finder's fee for introducing Encore
Technology Group as a potential eligible portfolio company to Origin and
consulting work performed in April and June, 1999 which included industry
research on Systems Integration and Value Added Reselling companies, including
developing a business plan overview of the Systems Integration/VAR industry.
This note is due and payable on May 31, 2000.
Our strategy and plan for the remainder of this fiscal year is to raise
additional debt and equity capital to fund our current operations and invest to
acquire eighty percent of the issued and outstanding capital stock of Encore
Investments, Inc. and eighty percent of the issued and outstanding capital of
Sigma Solutions, Inc. In addition, we anticipate raising additional equity
capital for making additional investments in other eligible portfolio companies
that we have identified and in others that come to our attention later this
year. Our current investment strategy is to create a profitable e-business
solutions company that provides its customers with web/e-commerce applications,
IT consulting and solutions and other value added services and which utilizes
ASP delivery and co-location hosting strategies to provide such applications and
services. We intend on creating such an eligible portfolio company by
consolidating one or more systems integrators, value added resellers and a
cutting edge e-business solutions companies that we have identified and will
identify over the next several months.
SPECIAL NOTICE REGARDING FORWARD LOOKING STATEMENTS
This Form 10-Q, the quarterly report, and certain information provided
periodically in writing or orally by the Company's Officers or its agents
contains statements which constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act, as amended and Section 21E of the
Securities Exchange Act of 1934. The words "expect," "believe," "plan,"
"intend," "estimate", "anticipate", "strategy", "goal" and similar expressions
and variations thereof if used are intended to specifically identify
forward-looking statements. Those statements may appear in a number of places in
this Form 10-Q and in other places, particularly, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and include
statements regarding the intent, belief or current expectations of the Company,
its directors or its officers with respect to, among other things:
(i) the successful completion of an investment(s) within one or more
eligible portfolio companies that we have identified, including but
not limited to, Encore Investments, Inc. and Sigma Solutions, Inc.;
(ii) our liquidity and capital resources; and (iii) our future performance
and operating results.
Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors. The factors that might cause such differences include, among others,
the following:
(i) any adverse effect or limitations caused by any governmental
regulations or actions;
(ii) any increased competition in our business of providing venture capital
to eligible portfolio companies;
(iii)successfully identifying,negotiating, structuring and making
investments within one or more eligible portfolio companies; (iv) our
ability to raise necessary investment capital within the time frame
agreed to between us and the principals of an eligible portfolio
company in order to successfully invest in such eligible portfolio
company; (v) the continued relationship with and success of the
management and owners of an eligible portfolio company after our
investment;
(vi) the continued performance of our eligible portfolio companies with
respect to their operations, including, but not limited to:
a. continued employment of key personnel, hiring of qualified
additional personnel;
b. the eligible portfolio company's mitigation of excessive and
extraordinary costs, and achieving projected profits and
additional customers for their growth;
c. Any other factors which would otherwise impede our eligible
portfolio company in achieving its performance goals upon which
we based a favorable return on our investment.
We undertake no obligation to publicly update or revise the forward looking
statements made in this Form 10-Q or annual report to reflect events or
circumstances after the date of this Form 10-Q and annual report or to reflect
the occurrence of unanticipated events.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We have no securities that are subject to interest rate fluctuations,
foreign currency risk, commodity price or any other relevant market risks during
the period covered by this Quarterly Report. We have not entered into any
hedging transactions or acquired any derivative instruments during the period
covered by this Quarterly Report.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
1. Exhibits
Exhibit Description
3.1 Articles of Incorporation of Origin filed on April 6, 1999
(incorporated by reference to Exhibit 3(i) to Form 10 filed by Origin
on August 16, 1999)
3.2 Bylaws of Origin. (Incorporated by reference to Exhibit 3(ii) to Form
10 filed by Origin on August 16, 1999)
4.1 Offering Circular for Series A Convertible Preferred Stock Offering
dated February 14, 2000. (Incorporated by reference to Exhibit A(1) to
Form 1-E filed by Origin on February 15, 2000)
27 Financial Data Schedule.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORIGIN INVESTMENT GROUP, INC.
/S/ OMAR A. RIZVI
---------------------------------
Omar A. Rizvi, Esq., LL.M.
President, Chairman of the Board of Directors
/S/ SCOTT K. LINDENBERGER
----------------------------------
Scott K. Lindenberger
Corporate Secretary, Vice President - Operations
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 652,632
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 652,632
<PP&E> 4,211
<DEPRECIATION> 789
<TOTAL-ASSETS> 656,054
<CURRENT-LIABILITIES> 98,703
<BONDS> 0
0
0
<COMMON> 4,000,000
<OTHER-SE> 557,351
<TOTAL-LIABILITY-AND-EQUITY> 656,054
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 521,843
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 111
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (727,161)
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
</TABLE>
