UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the quarterly period ended: June 30, 2003
or
|_| Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to
------------------ -----------------
Commission File Number: 000-23039
ORALABS HOLDING CORP.
(Exact name of small business issuer as specified in its charter)
Colorado 14-1623047
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2901 South Tejon, Englewood, Colorado 80110
------------------------------------- -----
(Address of principal offices) (Zip Code)
(303) 783-9499 executive
--------------
(Issuer's telephone number)
(Former name, former address and former
fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
|X| Yes |_| No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 after the
distribution of securities under a plan confirmed by a court.
|_| Yes |_| No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 2003 Issuer had 9,160,755 shares of common stock, $.001 Par
Value, outstanding. Transitional Small Business Disclosure Format (check one)
Yes |_| |X| No
Table of Contents
Part I. Financial Information
Item 1. Financial Statement Page
------- ------------------- ----
Consolidated Balance Sheets as of June 30, 2003 (Unaudited)
And December 31, 2002............................................2
Consolidated Statements of Operations Three Months
And Six Months Ended June 30, 2003 and 2002 (Unaudited)..........3
Consolidated Statement of Stockholders' Equity from
December 31, 2002 Through June 30, 2003 (Unaudited)..................4
Consolidated Statements of Cash Flows, Six Months Ended
June 30, 2003 and 2002 (Unaudited)...............................5
Notes to Consolidated Financial Statements.....................6 - 8
Item 2. Management's Discussion and analysis of Financial Conditions
And Results of Operations..................................9 - 10
Part II. Other Information ...........................................11 - 22
Exhibit Index................................................................
1
ORALABS HOLDING CORP AND SUBSIDIARIES
Consolidated Balance Sheets
---------------------------
-------------------------------------------------------------------------------------------------------------------
June 30, 2003 December 31, 2002
Unaudited
-------------------------------------------------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $2,384,563 $2,677,607
Accounts receivable, net of allowance for doubtful accounts
of $397,593 and $359,201, respectively 2,219,543 1,793,037
Inventory 1,926,527 2,003,542
Deferred income taxes 211,124 305,428
Prepaid expenses 230,472 143,068
Deposits 253,841 128,768
---------- ----------
Total Current Assets 7,226,070 7,051,450
Property and equipment at cost, net 1,154,407 1,234,893
Long Term Deferred Taxes 30,273 32,383
---------- ----------
Total Assets 8,410,750 8,318,726
===============================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 522,356 407,701
Accrued liabilities 358,198 305,189
Notes Payable-Current 22,874 22,349
Reserve for Returns 381,972 539,118
Income taxes payable 150,758 270,090
---------- ----------
Total current liabilities 1,436,158 1,544,447
Long Term Liabilities
Note Payable 36,093 48,054
--------- ---------
Total long term liabilities 36,093 48,054
Total liabilities 1,472,251 1,592,501
---------- ----------
Commitments and contingencies
Stockholders' equity
Preferred stock, $.001 par value, 1,000,000 shares authorized; none
issued and outstanding
Common stock, $.001 par value; 100,000,000 shares authorized,
9,160,755 issued and outstanding at the end of both periods 9,160 9,160
Additional paid -in capital 1,216,905 1,216,905
Retained Earnings 5,712,434 5,500,160
---------- ----------
Total stockholders' equity 6,938,499 6,726,225
---------- ----------
Total liabilities and stockholders' equity $8,410,750 8,318,726
===============================
---------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
2
ORALABS HOLDING CORP AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months and Six Months ended June 30, 2003 and June 30, 2002
Unaudited
---------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
06/30/03 06/30/02 06/30/03 06/30/02
---------------------------------------------------------------------------------------------------------------------
Revenues:
Product sales $3,474,434 $3,002,563 7,714,831 6,929,175
---------- ---------- ---------- ----------
Total Revenues 3,474,434 3,002,563 7,714,831 6,929,175
---------- ---------- ---------- ----------
Cost of Sales 2,503,763 2,289,599 5,139,911 4,640,243
---------- ---------- ---------- ----------
Gross profit 970,671 712,964 2,574,920 2,288,932
---------- ---------- ---------- ----------
Operating Expenses:
Engineering 59,594 32,567 123,852 71,365
Selling and marketing costs 253,132 415,295 922,825 897,269
General and administrative 554,289 514,530 1,193,307 1,001,575
Other 11,005 9,471 15,315 18,762
---------- ---------- ---------- ----------
Total operating expenses 878,020 971,863 2,255,299 1,988,971
---------- ---------- ---------- ----------
Net Operating Income 92,651 -258,899 319,621 299,961
Other Income (expense)
Interest and other income 10,260 16,972 19,735 48,060
---------- ---------- ---------- ----------
Total other income (expense) 10,260 16,972 19,735 48,060
---------- ---------- ---------- ----------
Net income before provision for income taxes 102,911 -241,927 339,356 348,021
Provision for income taxes 41,289 -91,953 127,082 127,124
---------- ---------- ---------- ----------
41,289 -91,953 127,082 127,124
---------- ---------- ---------- ----------
Net Income/(Loss) $ 61,622 $- 149,974 $ 212,274 $ 220,897
========== ========== ========== ==========
Basic income per common share $ .01 $ -.02 $ .02 $ .02
========== ========== ========== ==========
Weighted average shares outstanding 9,160,755 9,160,755 9,160,755 9,160,755
========== ========== ========== ==========
Diluted income per share $ .01 $ -.02 $ .02 $ .02
========== ========== ========== ==========
Diluted weighted average shares outstanding 9,160,755 9,160,755 9,160,755 9,279,357
========== ========== ========== ==========
---------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
3
ORALABS HOLDING CORP AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the Six months ended June 30, 2003
Unaudited
--------------------------------------------------------------------------------------------------------------------------------
Stock Common Stock Addl. Paid-In Retained
Preferred Amount Shares Amount Capital Earnings Total
Shares
--------------------------------------------------------------------------------------------------------------------------------
Balance at Dec. 31, 2002 9,160,755 $9,160 $1,216,905 $5,500,160 $6,726,225
Net Income 212,274 212,274
------------------------------------------------------------------------------------------------
Balance at June 30, 2003
9,160,755 $9,160 $1,216,905 $5,712,434 $6,938,499
=================================================================================================================================
See Notes to Consolidated Financial Statements
4
ORALABS HOLDING CORP AND SUBSIDIARIES
Consolidated Statements of Cash Flow
For the Six months ended June 30, 2003 and 2002
Unaudited
--------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30
2003 2002
--------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
------------------------------------
Net Income $ 212,274 $ 220,897
---------- ----------
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation 200,290 210,662
Changes in assets and liabilities:
Other current assets -116,063 132,758
Accounts receivable -426,506 171,748
Inventory 77,015 -208,003
Accounts payable 114,655 -13,316
Accrued expenses 53,009 67,150
Reserve for returns -157,146 -29,157
Income taxes payable -119,332 -151,232
---------- ----------
Net cash used in operating activities -374,078 180,610
---------- ----------
Cash from investing activities
Investment in property and equipment -119,804 -195,330
---------- ----------
Net Cash used in investing activities -119,804 -195,330
---------- ----------
Cash from financing activities
Payment on long term debt -11,436 0
--------- ---------
Net Cash used in financing activities -11,436 0
--------- ---------
Net increase/(decrease in cash and cash equivalents -293,044 206,177
Cash and cash equivalents, beginning of the period 2,677,607 2,273,838
---------- ----------
Cash and cash equivalents, end of the period $2,384,563 $2,480,015
========== ==========
Cash paid for income taxes was $150,000 (2003) and $278,362 (2002)
--------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
5
ORALABS HOLDING CORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. This report should, therefore, be read in
conjunction with the Annual Report on Form 10-KSB for the year ended December
31, 2002(the "2002 Form 10-KSB") of OraLabs Holding Corp. and Subsidiaries (the
"Company").
The information included in this report is unaudited but reflects all
adjustments which, in the opinion of management, are necessary to a fair
statement of the results of the interim periods covered thereby. All adjustments
are of a normal and recurring nature except as described herein.
Note 2 - Property and Equipment Property and equipment consisted of the
following:
Machinery and equipment:
------------------------
============================================================================
June 30, 2003
----------------------------------------------------------------------------
Machinery and equipment $1,899,744
Leasehold Improvements 719,920
----------
2,619,664
----------
Less accumulated depreciation (1,465,257)
----------
$1,154,407
==========
Note 3 - Line-of-Credit
The Company entered into a line-of-credit agreement with a bank in the amount of
$1,000,000, which expires May 2004. As of June 30, 2003, the Company had
available the entire $1,000,000 unused line-of-credit. The line-of-credit is
collateralized by a first lien on all of the Company's business assets.
Note 4 - Reserve for Returns and Allowances
The company reserves 2.75% of revenues for returns and allowances of their
product. The reserve is recorded as a reduction of revenues and as a liability
on the balance sheet. The amount recorded as a liability on the balance sheet at
June 30, 2003 is $381,972.
6
ORALABS HOLDING CORP AND SUBSIDIARIES
Note 5- Earnings Per Share
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share (EPS) computations:
For the Three Months Ended June 30, 2003
------------------------------------------------------------------------------------------------------------------------------
Income Shares
(Numerator) (Denominator) Per Share Amt
------------------------------------------------------------------------------------------------------------------------------
Net Income $ 61,622
Basic EPS
Weighted average beginning shares outstanding 9,160,755
-----------------------------------
Income available to stockholders $ 61,622 9,160,755 $.01
===========================================================
For the Three Months Ended June 30, 2002
-----------------------------------------------------------------------------------------------------------------------------
Income Shares
(Numerator) (Denominator) Per Share Amt
-----------------------------------------------------------------------------------------------------------------------------
Net Income -$149,974
Basic EPS
Weighted average beginning shares outstanding 9,160,755
------------------------------------------------------------
Income available to stockholders -$149,974 9,160,755 -$.02
================
Effect of Dilutive Common Stock Options
Diluted EPS
-----------------------------------------------------------
Income available to common stockholders
Plus assumed conversions -$149,974 9,160,755 -$.02
===========================================================
----------------------------------------------------------------------------------------------------------------------------
7
ORALABS HOLDING CORP AND SUBSIDIARIES
For the Six Months Ended June 30, 2003
--------------------------------------------------------------------------------------------------------------------------------
Income Shares
(Numerator) (Denominator) Per Share Amt
--------------------------------------------------------------------------------------------------------------------------------
Net Income $212,274
Basic EPS
Weighted average beginning shares outstanding 9,160,755
-----------------------------------
Income available to stockholders $212,274 9,160,755 $.02
=======================
Effect of Dilutive Common Stock Options
Diluted EPS
----------------------------------------------------------------
Income available to common stockholders
Plus assumed conversions $212,274 9,160,755 $.02
================================================================
---------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 2002
---------------------------------------------------------------------------------------------------------------------------------
Income Shares
(Numerator) (Denominator) Per Share Amt
---------------------------------------------------------------------------------------------------------------------------------
Net Income $ 220,897
Basic EPS
Weighted average beginning shares outstanding 9,160,755
-------------------------------------------
Income available to stockholders $ 220,897 9,160,755 $.02
=================
Effect of Dilutive Common Stock Options 118,602
Diluted EPS
---------------------------------------------------------------
Income available to common stockholders
Plus assumed conversions $ 220,897 9,279,357 $.02
===============================================================
--------------------------------------------------------------------------------------------------------------------------------
8
ORALABS HOLDING CORP AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Special Note on Forward-Looking Statements
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended, provide a safe harbor for certain
forward-looking statements. This quarterly report contains statements that are
forward-looking. Forward looking statements include those which are not
historical facts, including without limitation statements about management's
expectations for any period beyond the fiscal quarter ended June 30, 2003. Words
such as "expect", "anticipate", "believe", "intend" and "estimate" and similar
expressions are examples of words which identify forward looking statements.
While these statements reflect the Company's beliefs as of the date of this
report, they are subject to assumptions, uncertainties and risks that could
cause actual results to differ materially and adversely from the results
contemplated, forecast or estimated in the forward-looking statements included
in this report. These factors include, but are not necessarily limited to, the
impact of competitive products, the acceptance of new products or product lines
in the marketplace, the Company's ability to manage growth, the availability of
an adequate workforce and changes in market conditions.
Results of Operations. For the three month period ending June 30, 2003 as
compared with the three month period ending June 30, 2002.
Product sales increased $471,871 or 16%. Sales increased due to higher volume of
lip balm sales to key customers.
Gross profit increased $257,707. As a percentage of sales gross profit increased
from 24% to 28%. The product mix being shipped in the second quarter of 2003
included larger quantities of lip balm which is less labor intensive than that
of the products shipped in the second quarter of 2002.
Engineering increased $27,027 or 83%. The increase can be attributed to
additional staffing for maintenance and safety compliance.
Selling and marketing decreased $162,163 or 39%. The decrease can be attributed
to a reduction in Sales Commissions (due to a significant amount of
non-commissioned sales by the President of the Company) for approximately
$97,000; Advertising for approximately $46,000; and Bad Debt expense for
approximately $25,000.
Provision for income tax increased $133,242 or 145%. Income before tax of
$102,911 for second quarter 2003 compared to $241,927 loss for second quarter
2002 resulted in the increased income tax.
The Company incurred a loss for the second quarter of year 2002 of $149,974, but
for the second quarter of 2003 the Net Income for the Company was $61,622, as
explained by the above activities. As a percentage of sales, the incurred loss,
which excludes Interest, Other Income and Income taxes, for the second quarter
of year 2002, was 9%, but for the second quarter of year 2003 the Operating
Income was 3% as a percentage of sales.
Results of Operations. For the six month period ending June 30, 2003 as compared
with the six month period ending June 30, 2002.
Product sales increased $785,656 or 11%. Sales increased due to higher volume of
lip balm sales to key customers.
Gross profit increased $285,988. As a percentage of sales gross profit remained
steady at 33% for both periods. The higher cost of raw materials in the first
quarter of 2003 as compared to the first quarter of 2002 did not continue to be
significantly higher in the second quarter of 2003 as compared to the second
quarter of 2002. However, the lower labor cost in the second quarter of 2003 as
compared with the second quarter of 2002 created offsetting variances for the
six month period resulting in no change in percentage of gross profit.
Engineering increased $52,487 or 74%. The increase can be attributed to
additional staffing for maintenance and safety compliance.
Selling and marketing increased $55,172 or 6%. An increase in Bad Debt Expense
for non-reoccurring write offs of uncollectible receivables in the amount of
$261,000 in the first quarter 2003 was partially offset by decreases in
Advertising, Bad Debt and Sales Commissions in the second quarter 2003.
General and administrative expenses increased $191,732 or 19%. The increase can
be attributed to Salaries and related payroll expenses increased approximately
$160,000 due in large part to additional staffing; Legal fees increased
approximately $27,000.
Interest and Other Income decreased $28,283 or 59%. This was due to reduced
royalty income for approximately $12,000; interest income for approximately
$11,000; and capital gains for approximately $5,000.
Net income decreased by $8,623 or 4%, as explained by the above activities. As a
percentage of sales, net operating income, which excludes Interest, Other Income
and Income taxes, remained the same at 4%.
9
Liquidity and Capital Resources. Balance Sheet as of June 30, 2003 compared to
December 31, 2002.
At June 30, 2003, the Company had $2,384,563 of cash and its current ratio was
approximately 5 to 1. The Company believes its current capital resources are
sufficient to fund operations for the next twelve months.
Net cash used in operating activities in the amount of $374,078 consists of the
following:
Accounts receivable increased $426,506. Increased revenue in conjunction with
reduced promotional allowances resulted in increased accounts receivable.
Prepaid Expenses increased $87,404. This increase is substantially from prepaid
insurance premiums of approximately $68,000 and for July rent paid in June.
Deposits increased $125,073. The Company made a deposit in second quarter of
2003 for raw materials that was subsequently used to pay for the raw materials
when received in the third quarter of 2003.
Accounts Payable increased $114,655. This is due to timing differences for
purchases of raw materials and broker commissions.
Accrued liabilities increased $53,009. This is due to timing differences on
payroll for earning period verses distribution of payment.
Reserve for Returns decreased $157,146. The Company made a specific allowance in
the amount of $150,000 in the fourth quarter of 2002. These products were
returned in the first quarter of 2003, which was absorbed by the specific
allowance, taking the reserve for returns back to 2.75% of revenues.
Income taxes payable decreased $119,332. This decrease was significantly from
tax payments made in June, 2003.
Retained earnings increased $212,274 as a result of net income.
Trends. Lip balm revenues increased to $6,200,328 in the first six months of
2003 as compared to $5,345,271 in the first six months of 2002, or a 16%
increase. Sales were strong across trade classes including Mass Market, Dollar
Stores, Grocery, Drug Stores, and Contract Packaging. However, third quarter
sales will likely be slowed and increased expenses will occur as the Company
moves into a larger and better equipped facility (see "Other Information"
below). The Company plans to aggressively pursue increased business to take
advantage of the new facility, but can not predict with certainty what growth
will take place or if and when it may occur.
Sales of sour drops and breath fresheners were $1,233,166 in the first six
months of 2003 as compared to $1,297,622 in the first six months of 2002, or a
5% decrease. The Company's revenue from established customers continued on track
with last year without any significant change to customers or products. The
Company will introduce into the market in the third quarter a new combo pack of
sour drops and sour candy that could help sales in the third quarter and beyond,
although it is to soon to predict the success or failure of this product.
The nutritional supplements, on a relatively smaller scale, showed decline in
revenue. Revenues were $281,338 in the first six months of 2003 as compared to
$310,001 in the first six months of 2002, or a 9% decrease. The second half of
year 2003 may see a continued downward trend in this category.
Impact of Inflation. The Company's financial condition has not been affected by
the modest inflation of the recent past. The Company believes that revenues will
not be materially affected by inflation. The Company's lip care and oral care
products are primarily very low retail price points and impulse items. The
nutritional supplements are a small part (approximately 4%) of revenues and
could be negatively impacted by inflation.
10
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As of the end of the period
covered by this report, the Company conducted an evaluation, under the
supervision and with the participation of the principal executive officer and
principal financial officer, of the Company's disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934 (the "Exchange Act")). Based on this evaluation, the principal executive
officer and principal financial officer concluded that the Company's disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms. There was no
change in the Company's internal control over financial reporting during the
Company's most recently completed fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
11
PART II - OTHER INFORMATION
Item No. 1. Legal Proceedings. The Company is not a party to any material
pending legal proceedings to which either it or its subsidiary is a party or to
which any of its property is subject.
Item No. 2. Changes in Securities. None.
Item No. 3. Defaults Upon Senior Securities. None.
Item No. 4. Submission of Matters to a Vote of Security Holders. On May 29,
2003, the annual meeting of stockholders of the Company was held at the
Company's headquarters in Englewood, Colorado. The matters voted upon at the
meeting were the election of directors and the ratification of the appointment
of the Company's auditors. With respect to the election of directors, all four
of the incumbent directors were re-elected. The voting was as follows: Gary H.
Schlatter 8,485,455 for, 2,842 against, 2,077 abstain; Michael I. Friess
8,485,455 for, 2,842 against, 2,077 abstain; Allen R. Goldstone 8,485,455 for,
2,842 against, 2,077 abstain; Robert C. Gust 8,485,455 for, 2,842 against, 2,077
abstain. There were no broker non-votes. With respect to the ratification of the
selection of the Company's auditors for fiscal year ending December 31, 2003,
there were 8,487,167 votes in favor, 2,922 against and 285 abstentions. There
were no broker non-votes.
Item No. 5. Other Information. Effective May 1, 2003, the Company and Gary H.
Schlatter entered into an Amended and Restated Employment Agreement to replace
the previous agreement that expired on April 30, 2003. The Agreement is for a
term of three years expiring on April 30, 2006, and continues the same salary
structure as included in the previous agreement, i.e., annual increases of 10%
per year starting with $392,645.00 for the first 12 months (which is a 10%
increase from the previous 12-month period). Under specified circumstances
involving a change in control, Mr. Schlatter may terminate the Agreement and
receive a lump sum payment equal to all of the compensation to which he would
have otherwise been entitled had the Agreement remained in effect for its entire
term.
The lease by which the Company occupies its second warehouse facility expired on
June 30, 2003. The landlord under that lease was an affiliated entity of Mr.
Schlatter. The Company is continuing to pay rent and to occupy the space on a
month-to-month basis as Mr. Schlatter is actively seeking to acquire, through an
affiliate, a larger office-warehouse facility that will replace both warehouses
presently occupied by the Company. It is Mr. Schlatter's and the Company's
intent that the rental rates established to lease the new facility will be
comparable to that which would be paid to unaffiliated parties.
Item No. 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required to be filed are listed below: Certain of the following
exhibits are hereby incorporated by reference pursuant to Rule 12(b)-32 as
promulgated under the Securities and Exchange Act of 1934, as amended, from the
reports noted below:
Exhibit
No. Description
------- -----------
4(1) Specimen Certificate for Common Stock 10.1(1) 1997 Stock
Plan
10.2(1) 1997 Non-Employee Directors' Option Plan
10.4(1) Form of Stock Option Grant under 1997 Non-Employee
Directors' Option Plan
10.5(i)(2) Business Lease Between the Company's Subsidiary and Gary
Schlatter (September 1, 2000)
10.5(ii)(3) Amended Business Lease Between the Company's Subsidiary and
2780 South Raritan, LLC effective October 15, 2000.
10.10(4) Amended and Restated Employment Agreement Between the
Company's Subsidiary and Gary Schlatter dated May 1, 2003.
11 No statement re: computation of per share earnings is
required since such computation can be clearly
determined from the material contained in this Report on Form
10-QSB
31.1(4) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
by Gary H Schlatter
31.2(4) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
by Emile J Jordan
32(4) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by
Gary H Schlatter and Emile J Jordan
1 Incorporated herein by reference to the Company's Form 10-K filed for
fiscal year 1997.
2 Incorporated herein by reference to the Company's Form 10-QSB filed for the
quarter ended September 30, 2000.
3 Incorporated herein by reference to the Company's Form 10-KSB filed for
fiscal year 2000.
4 Filed herewith.
(b) No report on Form 8-K was filed during the quarter reported upon in this
report.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORALABS HOLDING CORP.
By: /s/ Gary H. Schlatter
---------------------------------------------
Gary H. Schlatter, President
By: /s/ Emile J. Jordan
---------------------------------------------
Emile J. Jordan, Chief Financial Officer
Dated August 14, 2003
13
Exhibit Index
Exhibit
No. Description
------- -----------
10.10 Amended and Restated Employment Agreement Between the
Company's Subsidiary and Gary Schlatter dated May 1, 2003.
31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by
Gary H Schlatter
31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by
Emile J Jordan
32 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by
Gary H Schlatter and Emile J Jordan
14
EXHIBIT 10.10
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is dated for reference purposes only May
1, 2003 and is by and between ORALABS, INC., a Colorado corporation (the
"Company" or the "Employer") and GARY SCHLATTER (the "Employee").
WHEREAS, the parties entered into an Amended and Restated Employment
Agreement dated April 25, 1997, as amended by Agreement dated May 1, 2000, which
expired on April 30, 2003; and
WHEREAS, the Company desires to be assured of the continued association
and services of the Employee for the Company; and
WHEREAS, Employee is willing and desires to be employed by the Company,
and the Company is willing to employ Employee, upon the terms, covenants and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
matters described in this Agreement, the adequacy and sufficiency of all of
which consideration is hereby acknowledged, the parties agree as follows:
1. Employment. Effective as of May 1, 2003, the Company hereby employs
Employee and Employee hereby accepts employment as the President and Chief
Executive Officer of the Company, subject to the terms and conditions
hereinafter set forth.
2. Extent of Duties. Employee agrees to devote such time and attention
to the business of the Company as may be required to fulfill the duties of his
position, which is expected to require the Employee to devote a substantial
amount of his working time, efforts, attention and energies. Employee shall not
engage in any other business activity or activities that require significant
personal services by Employee that in the judgment of the Board of Directors of
the Company may conflict with the proper performance of Employee's duties under
this Agreement.
3. Duties. Employee will, in addition to fulfilling his
responsibilities in the capacity of President and Chief Executive Officer of the
Company, perform such functions and duties as the Company may specify or from
time to time assign to him and which are consistent with said positions.
Employee shall have full responsibility and authority for formulating policies
and for the management and operation of the Company, subject to the general
direction and control of the Board of Directors.
4. Term of Employment. (a) The term of this Agreement shall commence
effective May 1, 2003, and continue for a period of three (3) years thereafter
(through and including April 30, 2006), or until Employee's death, or upon the
date that Employee is notified in writing pursuant to Section 4(c)(iii) that his
employment has terminated for good and sufficient cause as defined herein, or
upon a termination by Employee pursuant to Section 19, whichever comes first.
(b) The term "good and sufficient cause" for purposes hereof is
defined as theft, fraud, embezzlement, the willful and continued failure by
Employee substantially to perform his duties hereunder (other than as resulting
from the Employee's incapacity due to physical or mental illness) after demand
for substantial performance delivered by the Company that specifically
identifies the manner in which the Company believes the Employee has not
substantially performed his duties, the willful engaging by the Employee of
misconduct which is materially injurious to the Company, monetarily or
otherwise, or the willful violation by the Employee of the provisions of this
Agreement. For purposes of this paragraph, no act, or failure to act, on the
part of Employee shall be considered willful unless done or omitted to be done,
not in good faith and without reasonable belief by Employee that his action or
omission was in the best interest of the Company.
15
(c) Notwithstanding the provisions of Section 4(a), Employee
shall not be deemed to have been terminated for "good and sufficient cause"
without: (i) reasonable notice to Employee setting forth the reasons for the
Company's intention to terminate for "good and sufficient cause"; (ii) an
opportunity for the Employee, together with his counsel, to be heard before the
Board of Directors, and, at Employee's or the Board of Director's discretion, an
arbitration panel in accordance with Section 14 hereof, and (iii) following such
hearing, delivery to the Employee of a notice of termination from the Board of
Directors finding that in the good faith opinion of the Board of Directors,
Employee was guilty of conduct set forth above in the definition of "good and
sufficient cause", specifying the particulars thereof in detail.
5. Disability. This Agreement shall not terminate upon the temporary
disability of the Employee, but the Company may terminate this Agreement upon
the permanent disability of the Employee. For purposes of this Agreement, the
term "disability" shall mean Employee's inability to perform his normal duties
under this Agreement. If the Company and Employee cannot agree within fifteen
(15) days as to the existence of a disability, the determination shall be made
by two (2) physicians, one (1) designated by the Company and one (1) by
Employee. If these two physicians cannot agree, they shall appoint a third
physician and the determination of the majority shall be conclusive and binding
on the Company and Employee. All costs incurred in determining the existence of
a disability shall be shared equally by Company and Employee. The date of
disability shall be the date upon which Employee and the Company agree or the
earliest date upon which the physicians determine that a disability exists,
whichever may apply.
6. Compensation. (a) Employee's salary for services performed under
this Agreement shall be at the rate of $392,645.00 per year for the first year,
$431,909.50 per year for the second year, and $475,100.45 per year for the third
year, payable by the Company in equal weekly installments and reduced by
applicable withholding of federal, state and local taxes. This salary may be
increased from time to time in the discretion of the Employer's Board of
Directors. If increased, this salary shall not be decreased thereafter during
the term of this Agreement without the consent of the Employee. The salary
provided in this Section 6 shall in no way be deemed exclusive and shall not
prevent Employee from participating in any other compensation or benefit plan of
Employer or from receiving any other consideration described in this Agreement.
(b) The Board of Directors of the Company may grant bonus
compensation to the Employee from time to time in such amounts and at such times
as determined by the Board of Directors in its discretion.
7. Benefits. In addition to Employee's salary and other compensation,
Employee is entitled to the benefits of any employee group benefit or employee
welfare benefit plan (e.g., medical insurance, term life insurance, retirement
benefits, profit sharing, stock option plans or grants, disability insurance or
similar benefits) which is provided by the Company to any of its employees.
Employee shall be entitled to the same benefits provided under any such plans
that are provided to all of the other employees of the Company as a group. Also,
the Company will pay the lease and insurance expenses for up to two automobiles
used by the Employee and will reimburse the Employee for his cellular telephone
expenses as well as other telephone related expenses.
8. No Alienation. The benefits provided hereunder shall not be subject
to alienation, assignment, pledge, anticipation, attachment, garnishment,
receivership, execution or levy of any kind, including liability for alimony or
support payments. Any attempt to cause such benefits to be so subject shall not
be recognized, except to the extent required by law.
9. Covenant Not to Compete. During the term of this Agreement and for a
period of one (1) year thereafter, Employee will not participate in any business
competitive to that of the business of Employer, except that Employee may make
passive investments in businesses engaged in such activities provided that any
such investment does not exceed a five percent (5%) equity interest. In
addition, during the term of this Agreement and thereafter, Employee will not
disclose or utilize any trade secrets or proprietary information of the Employer
except within the scope of Employee's employment hereunder.
16
10. Expenses. Employee shall be entitled to prompt reimbursement for
all reasonable expenses incurred by Employee in the performance of his duties
hereunder.
11. Assignment. This Agreement is for personal services and neither
party may assign or transfer any rights or obligations without the express
written consent of the other.
12. Colorado Law. This Agreement has been made and entered into in the
State of Colorado. This Agreement shall be construed in accordance with the laws
of the State of Colorado.
13. Severability. If it is determined that any provision of this
Agreement is invalid or of no force and effect, this shall not impair the
remainder of this Agreement and all other provisions shall remain in full force
and effect.
14. Arbitration. Any controversy or claim arising out of or relating to
this Agreement shall be settled solely by arbitration in the State of Colorado
in accordance with the commercial arbitration rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court have jurisdiction thereof. The parties agree that the
arbitrator shall have the right to award the prevailing party in any controversy
the attorneys' fees and costs incurred by such party in connection therewith.
15. Counsel. Employee represents that he has consulted his own legal
counsel to the extent deemed necessary by Employee, that such counsel has
advised him as to the effect of the terms and conditions of this Agreement, and
Employee acknowledges that legal counsel to the Company does not represent
Employee in connection herewith.
16. Waiver, Complete Agreement and Modification. (a) Waiver of any
breach of this Agreement shall not be construed as a waiver of any subsequent
breach of this Agreement.
(b) This Agreement contains the full and complete agreement
between the parties concerning the employment of Employee, and supersedes all
prior statements, agreements, understandings and representations with respect to
the employment of Employee.
(c) This Agreement may only be modified by written amendment,
signed by the parties.
17. Survival. Each provision of this Agreement which by its terms is to
apply after the termination of this Agreement shall survive the termination of
this Agreement.
18. Notices. All notices required to be given by this Agreement shall
be made in writing and shall be deemed delivered upon personal delivery to the
party requiring notice or when deposited in the U.S. Mail, postage prepaid,
certified or registered, return receipt requested, addressed to the party
requiring notice at the address set forth on the signature page of this
Agreement or as any party may from time to time specify in writing to the other
party.
19. Termination By Employee. Upon the occurrence of any of the
following events this Agreement may be terminated by the Employee by written
notice to Employer:
(a) the sale by Employer of substantially all of its assets;
(b) the sale, exchange or other disposition, in one
transaction or a series of related transactions, of at least forty percent (40%)
of the outstanding voting shares of Employer;
(c) a decision by Employer to terminate its business and
liquidate its assets;
(d) the merger or consolidation of Employer with another
entity or an agreement to such merger or consolidation or any other type of
reorganization;
17
(e) Employer makes a general assignment for the benefit of
creditors, files a voluntary bankruptcy petition, files a petition or answer
seeking a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law, there shall have been filed any
petition or application for the involuntary bankruptcy of Employer, or other
similar proceeding, in which an order for relief is entered or which remains
undismissed for a period of thirty days or more, or Employer seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of
Employer or any material party of its assets; or
(f) there are material changes in Employee's duties and
responsibilities without his written consent.
20. Effect of Termination. Except in the case of termination due to
Employee's death, termination by the Employee or Company under this Agreement
may only be effective by the terminating party giving the other party a written
notice of termination, describing the reasons therefore. In the event of
termination by Company for "good and sufficient cause", Employee shall be
entitled to compensation only through the date of the notice of termination
given pursuant to Section 4(c)(iii). In the event of termination due to the
Employee's death, the Employee's estate will be entitled to a death benefit
equal to the total salary remaining to paid for the remaining term of the
Agreement, reduced by life insurance benefits, if any, paid to Employee's estate
under policies (other than group policies) for which the Employer pays all
premiums and Employee's estate is the beneficiary. In the event of a temporary
or permanent disability described in Section 5 above, and regardless of whether
or not the Employer elects to terminate this Agreement, Employee shall be
entitled to receive all compensation accrued and payable during the entire term
of this Agreement regardless of the date of the disability. However, any such
payment shall be reduced by disability insurance benefits, if any, paid to
Employee under policies (other than group policies) for which Employer pays all
premiums and Employee is the beneficiary. In the event of a termination by
Employee pursuant to Section 19, Employee shall receive a lump sum payment equal
to all of the compensation to which he otherwise would have been entitled had
the Agreement remained in effect for its entire term. Any termination of this
Agreement shall not prejudice any remedy to which the Employee or Company may be
entitled, either at law, equity or under this Agreement.
21. Indemnification. To the fullest extent permitted by applicable law,
Company agrees to indemnify, defend and hold Employee harmless from any and all
claims, liabilities, damages and expenses (including reasonable attorneys' fees)
hereafter arising out of or in connection with the activities of the Company or
its employees, including Employee or other agents in connection with and within
the scope of this Agreement or by reason of the fact that Employee is or was a
director or officer of the Company or any affiliate of the Company. To the
fullest extent permitted by applicable law, Company shall advance to Employee
expenses of defending any such action, claim or proceeding. However, Company
shall not indemnify Employee or defend Employee against, or hold him harmless
from any claims, damages, liabilities or expenses, including attorneys' fees,
resulting from the gross negligence or willful misconduct of Employee. The duty
to indemnify described in this section shall survive the expiration or early
termination of this Agreement as to any claims based on facts or conditions
which occurred or are alleged to have occurred prior to such expiration or
termination.
22. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and expenses in addition to any
other relief to which that party may be entitled.
18
IN WITNESS WHEREOF, the parties have executed this
Agreement on the dates set forth below.
COMPANY:
ORALABS, INC., a Colorado corporation
2901 South Tejon Street
Englewood, Colorado 80110
Address
By: /s/
------------------------------
Director
Date:______________________________________
EMPLOYEE:
/s/ Gary Schlatter
------------------------------------------
Gary Schlatter
4904 South Elizabeth Circle
Englewood, Colorado 80110
Address
------------------------------------------
Date
19
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary H. Schlatter, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Company;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
c) disclosed in this report any change in the registrant's internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Dated: August 14, 2003 By: /s/ Gary H. Schlatter
---------------------
Gary H. Schlatter, President
20
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Emile J. Jordan, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Company;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
c) disclosed in this report any change in the registrant's internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Dated: August 14, 2003 By: /s/ Emile J. Jordan
-------------------
Emile J. Jordan, Chief Financial Officer
21
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of OraLabs Holding Corp. (the "Company")
on Form 10-QSB for the period ending March 31, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report") We, Gary H. Schlatter,
Chief Executive Officer of the Company, and Emile J Jordan, Chief Financial
Office of the Company, certify, pursuant to 18 USC SS. 1350, as adopted pursuant
to SS. 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge
and belief:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Gary H. Schlatter
------------------------------------------
Gary H. Schlatter, Chief Executive Officer
/s/ Emile J Jordan
------------------------------------------
Emile J Jordan, Chief Financial Officer
Dated August 14, 2003
22