UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended May 31, 2007
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 Number 333-133347
ONLINE ORIGINALS, INC.
(Exact name of registrant as specified in its charter)
Nevada 98-0479983
- ---------------------------------- ------------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
RPO 163 Sorrento, British Columbia, Canada, V0E 2W0
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 313-9781
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 Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes __ No _X__
Number of shares issued and outstanding of the registrant's class of common
stock as of July 12, 2007: 3,200,000 shares of common stock
Authorized share capital of the registrant: 75,000,000 common shares, par value
of $0.001
The Company did not recognize any revenue for the quarter ended May 31, 2007.
Transitional Small Business Disclosure Format: Yes No X
----- -----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ONLINE ORIGINALS, INC.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
(Unaudited)
May 31, 2007
Page
Financial Statements:
Interim Balance Sheets F-2
Interim Statements of Operations F-3 to F-4
Interim Statements of Cash Flows F-5
Interim Statement of Stockholders' Equity F-6
Notes to Interim Financial Statements F-7 to F-11
The accompanying notes are an integral part of these statements.
F-1
ONLINE ORIGINALS, INC.
(A Development Stage Company)
INTERIM BALANCE SHEETS
November 30,
May 31, 2007 2006
(Unaudited) (See Note 1)
ASSETS
Current
Cash $ 27,167 $ 54,596
Prepaid expense 3,218 6,968
Inventory 2,660 2,660
------------------------------------------
Total Current Assets 33,045 64,224
Computer Equipment, net of depreciation $663 6,173 -
Website Development Costs, net of amortization of $1,237 2,811 3,486
------------------------------------------
Total Assets $ 42,029 $ 67,710
==========================================
LIABILITIES
Current
Accounts payable $ 750 $ 798
Accrued liabilities 1,750 4,500
------------------------------------------
Total Current Liabilities 2,500 5,298
------------------------------------------
Commitments and Contingencies (Notes 4 and 7)
STOCKHOLDERS' EQUITY
Capital Stock
Authorized:
75,000,000 common shares, par value $0.001 per share
Issued and outstanding:
3,200,000 common shares at May 31, 2007 and November 30, 2006 3,200 3,200
Additional paid-in capital 77,299 77,299
Accumulated comprehensive (loss) (795) (1,229)
Deficit Accumulated During the Development Stage (40,175) (16,858)
------------------------------------------
Total Stockholders' Equity 39,529 62,412
------------------------------------------
Total Liabilities and Stockholders' Equity $ 42,029 $ 67,710
==========================================
The accompanying notes are an integral part of these statements.
F-2
ONLINE ORIGINALS, INC.
(A Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS
For the period from November 18, 2005 (Date of Inception) to May 31, 2007
(unaudited)
Three-month period Three-month period
ending ending
May 31, 2007 May 31, 2006
--------------------------------------------------
Revenue $ - $ -
--------------------------------------------------
Cost of Goods Sold - -
--------------------------------------------------
- -
--------------------------------------------------
Expenses
Depreciation and amortization 907 -
Consulting 1,875 -
Office and administration 398 202
Organizational costs - -
Marketing - -
Professional fees 3,624 13,901
--------------------------------------------------
6,804 14,103
--------------------------------------------------
Net Loss From Operations (6,804) (14,103)
--------------------------------------------------
Other Income
Interest Income - -
Net Loss For The Period $ (6,804) $ (14,103)
==================================================
Basic And Diluted Loss Per Share
$ 0 $ 0
==================================================
Weighted Average Number Of Shares
Outstanding 3,200,000 2,500,000
==================================================
The accompanying notes are an integral part of these statements.
F-3
ONLINE ORIGINALS, INC.
(A Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS
For the period from November 18, 2005 (Date of Inception) to May 31, 2007
(unaudited)
Cumulative amounts
from Date of Inception
Six-month period Six-month period on November 18 2005 to
ending May 31, 2007 ending May 31, 2006 May 31, 2007
-----------------------------------------------------------------------------
Revenue $ - $ - $ 314
-----------------------------------------------------------------------------
Cost of Goods Sold - - 110
-----------------------------------------------------------------------------
- - 204
-----------------------------------------------------------------------------
Expenses
Depreciation and amortization 1,338 - 1,900
Consulting 3,750 - 4,425
Office and administration 1,214 354 4,337
Organizational costs - - 665
Marketing 8,461 - 8,462
Professional fees 8,554 15,688 20,592
-----------------------------------------------------------------------------
23,317 16,042 40,381
-----------------------------------------------------------------------------
Net Loss From Operations (23,317) (16,042) (40,177)
-----------------------------------------------------------------------------
Other Income
Interest Income - 2 2
Net Loss For The Period $ (23,317) $ (16,040) $ (40,175)
=============================================================================
Basic And Diluted Loss Per Share
$ 0 $ 0 $ (0.01)
=============================================================================
Weighted Average Number Of Shares
Outstanding 3,200,000 2,500,000 2,881,250
=============================================================================
The accompanying notes are an integral part of these statements.
F-4
ONLINE ORIGINALS, INC.
(A Development Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
For the period November 18, 2005 (Date of Inception) to May 31, 2007
(unaudited)
Cumulative amounts
from Date of
Six month Six month period Inception on
period ended ended May 31, 2006 November 18, 2005 to
May 31, 2007 May 31, 2007
- --------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net loss for the period $ (23,317) $ (16,040) $ (40,175)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities
Depreciation and amortization 1,338 - 1,900
Inventory - - (2,660)
Prepaid expenses 3,750 (93) (3,218)
Accounts payable and accrued liabilities (2,798) (2,135) 2,500
-------------------------------------------------------------------------
Cash from (Used in) Operating Activity (21,027) (18,268) (41,653)
-------------------------------------------------------------------------
Cash Flows from Investing Activity
Additions to fixed assets (6,836) - (10,884)
-------------------------------------------------------------------------
Net Cash (Used in) Investing Activities (6,836) - (10,884)
-------------------------------------------------------------------------
Cash Flows From Financing Activity
Issuance of common shares - - 95,000
Deferred offering costs - - (14,501)
Foreign currency translation adjustment 434 - (795)
-------------------------------------------------------------------------
Net Cash Provided by Financing Activity 434 - 79,704
-------------------------------------------------------------------------
Increase (Decrease) in Cash during the Period (27,429) (18,268) 27,167
Cash, Beginning Of Period 54,596 25,085 -
-------------------------------------------------------------------------
Cash, End Of Period $ 27,167 $ 6,817 $ 27,167
=========================================================================
Supplemental Disclosure Of Cash Flow
Cash paid for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
=========================================================================
The accompanying notes are an integral part of these statements.
F-5
ONLINE ORIGINALS, INC.
(A Development Stage Company)
INTERIM STATEMENT OF STOCKHOLDERS' EQUITY
For the Period from November 18, 2005 (Date of Inception) to May 31, 2007
(unaudited)
CAPITAL STOCK DEFICIT
ACCUMULATED ACCUMULATED
---------------------------------------------
ADDITIONAL DURING THE COMPRE-
PAID-IN DEVELOPMENT HENSIVE
SHARES AMOUNT CAPITAL STAGE INCOME (LOSS) TOTAL
-----------------------------------------------------------------------------------------------------
November 18, 2005 - Shares
issued for cash at $0.01 1,800,000 $ 1,800 $ 16,200 $ - $ - $ 18,000
November 28, 2005 - Shares
issued for cash at $0.01 700,000 700 6,300 - - 7,000
Net loss for the period
ended November 30, 2005 - - - (2,680) (2,680)
-----------------------------------------------------------------------------------------------------
Balance, November 30, 2005
2,500,000 2,500 22,500 (2,680) - 22,320
-----------------------------------------------------------------------------------------------------
July 21, 2006 - Shares
issued for cash at 0.10, net
of deferred offering costs 700,000 700 54,799 - - 55,499
of $14,501
Foreign currency translation
adjustment - - - - (1,229) (1,229)
Net loss for the period
ended November 30, 2006 - - - (14,178) (14,178)
-----------------------------------------------------------------------------------------------------
Balance, November 30, 2006
3,200,000 3,200 77,299 (16,858) (1,229) 62,412
-----------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment - - - - 434 434
Net loss for the period - - - (23,317) (23,317)
-----------------------------------------------------------------------------------------------------
Balance, May 31, 2007
3,200,000 $ 3,200 $ 77,299 $ (40,175) $ (795) $ 39,529
=====================================================================================================
The accompanying notes are an integral part of these statements.
F-6
ONLINE ORIGINALS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
1. UNAUDITED STATEMENTS
While the information presented in the accompanying interim financial
statements in unaudited, it includes all adjustments which are, in the
opinion of management, necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented. Except as disclosed below, these interim financial
statements follow the same accounting policies and methods of their
application as the Company's audited November 30, 2006 annual financial
statements. It is suggested that these interim financial statements be
read in conjunction with the Company's audited financial statements for
the year ended November 30, 2006, included in the annual report
previously filed with the Securities and Exchange Commission on Form
10-KSB. The results of operations for the interim periods presented are
not necessarily indicative of the results to be expected for the full
year.
The information as of November 30, 2006 is taken from the audited
financial statements of that date.
2. NATURE AND CONTINUENCE OF OPERATIONS
a) Organization
The Company was incorporated in the State of Nevada, United States of
America, on November 18, 2005. The Company's year end is November 30.
b) Development Stage Activities
The Company is in the development stage and has realized minimal
revenues from its planned operations. Online Originals' business plan
is to develop a membership based website art gallery/auction house
specifically focused on displaying and selling original artwork.
Based upon the Company's business plan, it is a development stage
enterprise. Accordingly, the Company presents its financial statements
in conformity with the accounting principles generally accepted in the
United States of America that apply in establishing operating
enterprises. As a development stage enterprise, the Company discloses
the deficit accumulated during the development stage and the cumulative
statements of operations and cash flows from inception to the current
balance sheet date.
3. SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist
in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management
who is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles
in the United States of America and have been consistently applied in
the preparation of the financial statements. The financial statements
are stated in United States of America dollars.
a) Organizational and Start-up Costs
Costs of start-up activities, including organizational costs, are
expensed as incurred in accordance with SOP 98-5.
b) Income Taxes
The Company has adopted the Statement of Financial Accounting
Standards No. 109 - "Accounting for Income Taxes" (SFAS 109). SFAS
109 requires the use of the asset and liability method of
accounting of income taxes. Under the asset and liability method
of SFAS 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary
differences between the financial statements carrying amounts of
F-7
ONLINE ORIGINALS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled.
c) Basic and Diluted Loss per Share
In accordance with SFAS No. 128 - "Earnings per Share," the basic
loss per common share is computed by dividing net loss available
to common stockholders by the weighted average number of common
shares outstanding. Diluted loss per common share is computed
similar to basic loss per common share except that the denominator
is increased to include the number of additional common shares
that would have been outstanding, if the potential common shares
had been issued and if the additional common shares were dilutive.
At May 31, 2007, the Company had no stock equivalents that were
anti-dilutive and excluded in the earnings per share computation.
d) Estimated Fair Value of Financial Instruments
The carrying value of the Company's financial instruments,
consisting of cash, prepaid expense, inventory, accounts payable
and accrued liabilities approximate their fair value due to the
short-term maturity of such instruments. Unless otherwise noted,
it is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these
financial statements.
e) Revenue Recognition
The company has had minimal revenues to date. It is the Company's
policy that revenues will be recognized in accordance with SEC
Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition."
Under SAB 104, product revenues (or service revenues) are
recognized when persuasive evidence of an arrangement exists,
delivery has occurred (or service has been performed), the sales
price is fixed and determinable and collectibility is reasonably
assured.
f) Inventory
Inventory is stated at the lower of cost or market. Cost includes
all costs of purchase, cost of conversion and other costs incurred
in bringing the inventory to its present location and condition.
g) Foreign Currency Translations
The Company's uses the Canadian dollar and the U.S. dollar as its
functional currency. The Company's reporting currency is the U.S.
dollar. All transactions initiated in other currencies are
re-measured into the functional currency as follows:
Monetary assets and liabilities at the rate of exchange in effect
at the balance sheet date,
ii) Non-monetary assets and liabilities, and equity at historical
rates, and iii)Revenue and expense items at the average rate of
exchange prevailing during the period.
Gains and losses on re-measurement are included in determining net
income for the period
Translation of balances from the functional currency into the
reporting currency is conducted as follows:
Assets and liabilities at the rate of exchange in effect at the
balance sheet date,
ii) Equity at historical rates, and
iii)Revenue and expense items at the average rate of exchange
prevailing during the period.
F-8
ONLINE ORIGINALS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
Translation adjustments resulting from translation of balances
from functional to reporting currency are accumulated as a
separate component of shareholders' equity as a component of
comprehensive income or loss.
h) Comprehensive Income (Loss)
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income". SFAS
130 requires that the components and total amounts of
comprehensive income be displayed in the financial statements
beginning in 1998. Comprehensive income includes net income and
all changes in equity during a period that arises from non-owner
sources, such as foreign currency items and unrealized gains and
losses on certain investments in equity securities.
i) Use of Estimates
The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying
notes. Actual results could differ from those estimates.
j) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents.
k) Equipment
Property and equipment are recorded at cost and depreciated over
their estimated useful lives. The Company uses the straight-line
method of depreciation
A summary of the estimated useful lives follows:
Computer equipment 3 years
l) Website Development Costs
Website development costs representing capitalized costs of
design, configuration, coding, installation and testing of the
Company's website are capitalized until initial implementation.
Upon implementation, the asset is amortized to expense over its
estimated useful life of three years using the straight-line
method. Accumulated amortization at May 31, 2007 was $1,237, and
amortization expense for the year ended November 30, 2006 was
$562. Ongoing website post-implementation costs of operation,
including training and application maintenance, will be charged to
expense as incurred.
m) Concentrations
Financial instruments that potentially subject the company to
concentrations of credit risk consist principally of cash and cash
equivalents. At May 31, 2007, the Company had $4,841 US Funds in
deposit in a business bank account which is not insured and US
equivalent of $22,326 in Canadian funds in a business bank account
which are insured by a Federal Government agency.
n) Recent Accounting Pronouncements
There were various accounting standards and interpretations issued
during 2007 and 2006, none of which are expected to have a
material impact on the Company's financial position, operations or
cash flows.
o) Other
The Company consists of one reportable business segment.
The Company paid no dividends during the periods presented.
4. BASIS OF PRESENTATION - GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles in the United States of
F-9
ONLINE ORIGINALS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
America, which contemplates continuation of the Company as a going
concern. However, the Company has minimal business operations to date
and has losses to date of approximately $40,175. These matters raise
substantial doubt about the Company's ability to continue as a going
concern. In view of these matters, realization of certain of the assets
in the accompanying balance sheet is dependent upon the Company's
ability to meet its financing requirements, raise additional capital,
and the success of its future operations. The Company acquired
additional operating capital through equity offerings to the public to
fund its business plan. There is no assurance that the equity offerings
will be successful in raising sufficient funds to assure the eventual
profitability of the Company. Management believes that actions planned
and presently being taken to revise the Company's operating and
financial requirements provide the opportunity for the Company to
continue as a going concern. The financial statements do not include
any adjustments that might result from these uncertainties.
5. COMMON STOCK
The Company's authorized common stock consists of 75,000,000 shares
with a par value of $0.001 per share.
On November 18, 2005, the Company issued 1,800,000 shares of common
stock at a price of $0.01 for cash totalling $18,000.
On November 28, 2005, the Company issued 700,000 shares of common stock
at a price of $0.01 for cash totalling $7,000.
On July 21, 2006, the Company issued 700,000 shares of common stock at
a price of $0.10 for cash totalling $70,000. The Company incurred
deferred offering costs of $14,501 related to this offering, resulting
in net proceeds of $55,499.
6. INCOME TAXES
The Company is subject to foreign and domestic income taxes. The
Company has had minimal income, and therefore has paid no income tax.
Deferred income taxes arise from temporary timing differences in the
recognition of income and expenses for financial reporting and tax
purposes. The Company's deferred tax assets consist entirely of the
benefit from net operating loss (NOL) carry-forwards. The net operating
loss carry forwards expire in various years through 2027. The Company's
deferred tax assets are offset by a valuation allowance due to the
uncertainty of the realization of the net operating loss
carry-forwards. Net operating loss carry-forwards may be further
limited by a change in company ownership and other provisions of the
tax laws.
The Company's deferred tax assets, valuation allowance, and change in
valuation allowance are as follows:
Estimated Tax Change in
Estimated NOL Benefit from Valuation Valuation Net Tax
Period Ending Carry-forward NOL Expires NOL Allowance Allowance Benefit
November 30, 2005 2,680 2026 670 (670) (670) -
November 30, 2006 16,858 2027 4,215 (4,215) (3,545) -
May 31, 2007 40,175 2028 10,043 (10,043) (5,828) -
F-10
ONLINE ORIGINALS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
Income taxes at the statutory rate are reconciled to the Company's
actual income taxes as follows:
Income tax benefit at statutory rate resulting from net operating
loss carry forward (25%)
Deferred income tax valuation allowance 25%
----------------
Actual tax rate 0%
================
7. RELATED PARTY TRANSACTIONS
The Company uses the offices of its President for its minimal office
facility needs for no consideration. No provision for these costs has been
provided since it has been determined that they are immaterial.
8. CONSULTING AGREEMENT
Effective October 23, 2006, the Company entered into a non-exclusive
agreement with an entity, whereby the entity would provide consulting
services in exchange for $7,500 cash. In addition, in the case of a
successful merger or acquisition, the entity will receive an additional fee
based on the gross value of a merger. The term of the agreement is for one
year. A portion of the $7,500 fee is included in prepaid expenses and will
be amortized over the remainder of the term.
F-11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statement sin the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results, or other developments.
Forward-looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic, and competitive,
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward-looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The independent registered public accounting firm's report on the Company's
financial statements as of November 30, 2006, and for each of the years in the
two year period then ended, include a "going concern" explanatory paragraph that
describes substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to the factors prompting the explanatory
paragraph are discussed below and also in Note 2 to the unaudited quarterly
financial statements.
Operations
We incorporated as Online Originals, Inc. (hereinafter referred to as Online) on
November 18th, 2005 in the State of Nevada. Our principal executive offices are
located at 2015 Eagle Bay Road, Blind Bay, British Columbia, Canada, V0E 2W0.
Telephone number is (604) 313-9781. Our Company's fiscal year end is November
30.
We are establishing a business, which provides a website where members and
customers are able to bid on and purchase pieces of art. Our target cliental is
the artistic community and those who enjoy purchasing, learning, and discussing
art. We are developing an online art gallery/auction house where members are
able to bid and purchase art pieces online. Currently the art available is from
Online Original's inventory. However, we also solicit pieces from artists, art
owners, and members of the site, as well as one-time users looking to sell a
single piece through our gallery/auction website. The website,
www.artbyonlineoriginals.com, showcases varieties of art ranging from paintings,
drawings, prints, and sculptures. We intend to bring together artists and art
enthusiasts who are purely interested in art. The website will allow people to
read about the artists, past sales and reviews, quality of service, and other
aspects individuals want to know before doing business over the Internet.
Members will have the ability to interact with other members in an open forum or
online chat room on our website. We intend to develop a community of art
enthusiasts through this site that will have profiles of other members and
member's comments on other sellers so individuals feel comfortable purchasing
online.
As we continue to develop our website, we will showcase original pieces of art
from unknown artists in the industry as well as established artists. Prints will
also be available for individuals looking for a piece that can otherwise only be
found in a gallery. We will continually add to our collection of art pieces,
following the demand of the members and listening to what they are looking for.
Buyers are able to purchase art pieces from the website using different forms of
payment. We are focusing on buyers and art collectors who are using the Internet
to find what they are looking for. Members are able to enter the website, log
into their account and see pieces that will be featured for the week. A dialogue
on the pieces giving the history and description will act as an educational tool
and encourage individuals to visit the site frequently. Featured artists,
periods of time, and styles will all be part of these weekly features. We
believe that having these aspects on the site will boost participation and
facilitate community.
12
Principal Products and Services
We are developing an online art gallery/auction house that allows members and
users to purchase original art pieces online. We currently offer prints that are
part of Online Original's inventory. Inventory pieces owned by the company have
been purchased at wholesale prices in lots, to be sold at retail prices.
Eventually, the available artwork will include paintings, drawings, prints, and
sculptures from artists, art owners and members of the site. Members of the
site, one-time users and we will sell these pieces. Fees and commissions will be
charged for the services we provide.
As we continue to develop our site, we will also include a member's only area
where individuals will have access to educational material, special sales, and
useful information about what is happening in the art community. Members will
have the ability to interact with other members and sellers, giving a community
feel to the website. Monthly membership fees will be charged.
Plan of Operation
The following discussion of the plan of operation, financial condition, results
of operations, cash flows and changes in financial position of our Company
should be read in conjunction with our most recent financial statements and
notes appearing elsewhere in this Quarterly Report on Form 10-QSB, our Quarterly
Report on Form 10-QSB filed April 16, 2007, our Annual Report on Form 10-KSB
filed March 5, 2007, and our Registration Statement on Form SB-2 filed on April
18, 2006.
We have generated only $314 in revenues from the sale of products since the
inception of our company. The following should be read jointly with the
financial statements, related notes, and the cautionary statement regarding
forward-looking statements, which appear elsewhere in this filing.
Prior to the public offering of stock, our principal activities consisted only
of initial organizational activities and the issuance of common shares to our
original affiliate shareholders. On May 12, 2006 our Registration Statement on
Form SB-2 was declared effective, enabling a registration offering of a maximum
of 700,000 common shares at a price of $0.10 per share. On July 21, 2006, we
accepted subscriptions for 700,000 shares from 40 investors, raising a total of
$70,000, less offering costs of approximately $14,500. At present, our common
shares are not posted for trading or listed on any exchange. 2,500,000 of
3,200,000 outstanding common shares are currently held by our officers and/or
directors.
This offering placed approximately $55,500 into our treasury, allowing us to
proceed with our Plan of Operation as set out in our prospectus, and in
accordance with the budget set out for our corporate operations for the twelve
months commencing August 1, 2006.
We have begun operations; the sale of membership and inventory items has begun.
We have no employees at the present time. We will continue to operate with very
limited administrative support, and our current officers will continue to be
responsible for all planning, developing and operational duties, without
compensation, for at least to the end of the first year of operations. This will
enable us to preserve capital during the early stages of company development.
Milestones
In January and February of 2007, we spent $6,836 on computers and related
equipment.
We are continuing the development of our website which will be ongoing over the
next 4 months. Our website is our main source of promotion and facilitation for
our members. It outlines the services, description of art pieces, artists, and
ordering instructions. It also includes brief bios on the creators and sellers
of the art pieces, as well as pictures of the pieces
Our purchase of inventory pieces has begun and will be ongoing. We expect that
the inventory level will reach $12,000 by September 2007, using existing working
capital. Our inventory level will be managed closely to ensure good turnover. It
is our intention to have our inventory turnover six to eight times a year.
Consequently, we will do monthly evaluation of our sales to adjust the products
and the quantity of each product we wish to carry in our inventory stock.
13
We have begun contacting both experienced and unpublished artists in order to
introduce our marketing plan. We have also begun developing our membership
program and have also contacted the local tourist bureau in order to market our
products though their international contacts.
In addition to the foregoing, we are designing a promotional campaign that will
be effective in the artistic community giving consideration to the diversity of
this community. The initial costs are $8,462 and are expected to reach
approximately $11,500 by the end of September 2007.
We plan to participate in special interest mailing lists to gain visibility
among targeted audiences as well as generate traffic for the website. Special
interest mailing lists are not direct lists, but instead are similar to email
newsletters or on-going dialogues dedicated to special interests. E-mail
messages would be sent to specific mailing lists targeting the individuals
currently viewing art and showing a visible interest in art. We also plan to
participate in industry related newsgroups to gain visibility and develop
relationships with targeted markets.
One of our marketing strategies is to offer a membership only auction house for
art buyers. Members will be offered choices of hundreds of art pieces, may view
bios on the sellers, and can see the quality of the piece while shopping from
the comfort of their own home.
Expenditures
The following table indicates our use of proceeds from the recently closed
offering over the next 6 months; to November 30, our year end:
Expenses
Marketing and Promotions 3,055
-------
Total $ 3,055
-------
The above expenditure items are defined as follows:
Marketing and Promotions: This expenditure refers to the cost of
setting up online marketing campaigns. Online marketing will be used as
the primary source to bring traffic to the website. Print direct mail
will make up the other area of marketing and promotions and will be
placed in art magazines, art stores, and art galleries and theaters.
We do not anticipate making any major purchases of capital assets, or conducting
any research and development in the next twelve months. Our current corporate
employee count is expected to remain the same for the next year.
We believe we have sufficient cash resources to satisfy our needs to the end of
November. Our ability to satisfy cash requirements thereafter and the need for
additional funding is dependent on our ability to generate revenue from our
business in sufficient quantity and on a profitable basis. Should we require
additional cash in the future, there can be no assurance that we will be
successful in raising additional debt or equity financing on terms acceptable to
our company, if at all.
Management Discussion and Analysis
At May 31, 2007, we had working capital of $30,545, compared to working capital
of $58,926, at November 30, 2006. At May 31, 2007, our total assets consisted of
cash $27,167, prepaid expenses of $3,218, inventory of $2,660 and capital assets
of $8,984. This compares with total assets at November 30, 2006 consisting of
cash of $54,596, prepaid expenses of $6,968, inventory of $2,660 and capital
assets of $3,486
At May 31, 2007, our total current liabilities decreased to $2,500 from $5,298
at November 30, 2006.
14
We have had $316 in revenue from inception. Our short and long term survival is
dependent on funding from sales of securities as necessary or from shareholder
loans.
Result of Operations
Our company posted losses of $6,804 for the quarter ended May 31, 2007 compared
to a loss of $14,103 for the quarter ended May 31, 2006. From inception to May
31, 2007, we have incurred losses of $40,175. The principal components of losses
were professional fees of $20,592, marketing costs of $8,462, office and
administration expenses of $4,337, consulting fees of $4,425, depreciation and
amortization of $1,900, organizational costs of $665 and cost of good sold of
$110.
As of the date of this report, our net cash balance is approximately $23,886. We
do not have any lending arrangements in place with banking or financial
institutions and we do not anticipate that we will be able to secure these
funding arrangements in the near future.
We believe our existing cash balances are sufficient to carry our normal
operations for the near future. To the extent that we require additional funds
to support our operations or the expansion of our business, we may attempt to
sell additional equity shares or issue debt. Any sale of additional equity
securities will result in dilution to our stockholders. There can be no
assurance that additional financing, if require, will be available to our
company or on acceptable terms.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
ITEM 3. CONTROLS AND PROCEDURES
a. Evaluation of Disclosure Controls and Procedures
The management of the Company has evaluated the effectiveness of the Issuer's
disclosure controls and procedures as of the end of the period of the report
dated May 31, 2007 and have concluded that the disclosure controls, internal
controls, and procedures are adequate and effective based upon their evaluation
as of the evaluation date.
b. Changes in Internal Control over Financial Reporting
There were no changes in the small business issuer's internal control over
financial reporting identified in connection with the Company evaluation
required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act
that occurred during the small business issuer's last fiscal quarter that has
materially affected or is reasonably likely to materially affect the small
business issuer's internal control over financial reporting.
ITEM 3(A)T. CONTROLS AND PROCEDURES
There have been no changes in the small business issuer's internal control over
financial reporting identified in connection with the evaluation required by
paragraph (d) of Rule 240.15d-15 that occurred during the small business
issuer's last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the small business issuer's internal control over
financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
15
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There have not been any changes in our securities since filing our last Annual
Report on Form 10-KSB to November 30, 2006, as file March 5, 2007.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
(a) Pursuant to Rule 601 of Regulation SB, the following exhibits are included
herein or incorporated by reference.
Exhibit
Number Description
3.1 Articles of Incorporation*
3.2 Bylaws*
31.1 Section 302 Certification - Chief Executive Officer
31.2 Section 302 Certification - Chief Financial Officer
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
Chief Executive Officer.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
Chief Financial Officer.
* Incorporated by reference to our SB2 Registration Statement, file number
333-133347, filed on April 18, 2006.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 16th day of July,
2007.
ONLINE ORIGINALS, INC.
Date: July 16, 2007 By: /s/ Gaye Adams
------------------------------
Name: Gaye Adams
Title: President/CEO, principal executive
officer
Date: July 16, 2007 By: /s/ Gregory Adams
------------------------------
Name: Gregory Adams
Title: Chief Financial Officer, principal
financial officer and principal
accounting officer
17