10QSB 1 ooi10q83107.txt 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 August 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 X No 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 The Company did not recognize any revenue for the quarter ended August 31, 2007. Transitional Small Business Disclosure Format: Yes [_] No [X]
TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm F-1 Balance Sheets - March 31, 2007 and December 31, 2006 F-2 Statements of Operations - Three months ended March 31, 2007 and 2006 and From May 25, 1988 (Inception) to March 31, 2007 F-3 Statement of Changes in Stockholders' Deficit - From May 25, 1988 (Inception) to March 31, 2007 F-4 Statements of Cash Flows - Three months ended March 31, 2007 and 2006 and From May 25, 1988 (Inception) to March 31, 2007 F-6 Notes to Financial Statements F-7 Item 2. Management's Discussion and Analysis 1 Item 3. Controls and Procedures 2 Item 3A(T). Controls and Procedures 3 PART II - OTHER INFORMATION Item 1. Legal Proceedings -Not Applicable 3 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - Not Applicable 3 Item 3. Defaults Upon Senior Securities - Not Applicable 3 Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable 3 Item 5. Other Information - Not Applicable 3 Item 6. Exhibits 3 SIGNATURES 4
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ONLINE ORIGINALS, INC. (A Development Stage Company) FINANCIAL STATEMENTS (Unaudited) August 31, 2007 Page Financial Statements: Balance Sheets F-2 Statements of Operations F-3 to F-4 Statements of Cash Flows F-5 Statement of Stockholders' Equity F-6 Notes to Financial Statements F-7 to F-11 F-1
ONLINE ORIGINALS, INC. (A Development Stage Company) BALANCE SHEETS August 31, 2007 November 30, 2006 (Unaudited) (See Note 1) ASSETS Current Assets Cash $ 23,599 $ 54,596 Prepaid expense 1,343 6,968 Inventory 5,269 2,660 ------------------------------------------ Total Current Assets 30,211 64,224 PROPERTY AND EQUIPMENT Computer Equipment, net of depreciation $1,233 5,603 - Website Development Costs, net of amortization of $1,574 2,473 3,486 ------------------------------------------ $ 8,076 $ 3,486 ------------------------------------------ Total Assets $ 38,287 $ 67,710 ========================================== LIABILITIES Current Liabilities Accounts payable $ 3,359 $ 798 Accrued liabilities 1,750 4,500 ------------------------------------------ Total Liabilities, all current 5,109 5,298 ------------------------------------------ Commitments and Contingencies (Notes 4 and 7) STOCKHOLDERS' EQUITY Common Stock Authorized: 75,000,000 common shares, par value $0.001 per share Issued and outstanding: 3,200,000 common shares at August 31, 2007 and November 30, 2006 3,200 3,200 Additional paid-in capital 77,299 77,299 Accumulated comprehensive (loss) (518) (1,229) Deficit Accumulated During the Development Stage (46,803) (16,858) ------------------------------------------ Total Stockholders' Equity 33,178 62,412 ------------------------------------------ Total Liabilities and Stockholders' Equity $ 38,287 $ 67,710 ========================================== The accompanying notes are an integral part of these statements. F-6
ONLINE ORIGINALS, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS (unaudited) Three-month period Three-month period ending ending August 31, 2007 August 31, 2006 ---------------------------------------------------- Revenue $ - $ - ---------------------------------------------------- Cost of Goods Sold - - ---------------------------------------------------- - - ---------------------------------------------------- Expenses Depreciation and amortization 907 225 Consulting 1,875 - Office and administration 596 216 Organizational costs - - Marketing - - Professional fees 3,250 4,100 ---------------------------------------------------- 6,628 4,541 ---------------------------------------------------- Net Loss From Operations (6,628) (4,541) ---------------------------------------------------- Other Income Interest Income - - Net Loss For The Period $ (6,628) $ (4,541) ==================================================== Basic And Diluted Loss Per Share $ * $ * ==================================================== Weighted Average Number Of Shares Outstanding 3,200,000 2,819,565 ==================================================== * Less than $(0.01) per share. The accompany notes are an integral part of these statements F-3
ONLINE ORIGINALS, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS (unaudited) Cumulative amounts from Date of Nine-month period Nine-month period Inception on November ending August 31, ending August 31, 18 2005 to August 31, 2007 2006 2007 ---------------------------------------------------------------------------- Revenue $ - $ - $ 314 ---------------------------------------------------------------------------- Cost of Goods Sold - - 110 ---------------------------------------------------------------------------- - - 204 ---------------------------------------------------------------------------- Expenses Depreciation and amortization 2,245 225 2,807 Consulting 5,625 - 6,300 Office and administration 1,810 570 4,933 Organizational costs - - 665 Marketing 8,461 - 8,462 Professional fees 11,804 19,788 23,842 ---------------------------------------------------------------------------- 29,945 20,583 47,009 ---------------------------------------------------------------------------- Net Loss From Operations (29,945) (20,583) (46,805) ---------------------------------------------------------------------------- Other Income Interest Income - 2 2 Net Loss For The Period $ (29,945) $ (20,581) $ (46,803) ============================================================================ Basic And Diluted Loss Per Share $ (0.01) $ (0.01) $ (0.02) ============================================================================ Weighted Average Number Of Shares Outstanding 3,200,000 2,607,299 2,926,227 ============================================================================ The accompanying notes are an integral part of these statements. F-4
ONLINE ORIGINALS, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS For the period November 18, 2005 (Date of Inception) to August 31, 2007 (unaudited) Cumulative amounts Nine month from Date of period ended Nine month period Inception on August 31, 2007 ended August 31, November 18, 2005 to 2006 August 31, 2007 -------------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net loss $ (29,945) $ (20,581) $ (46,803) Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities Depreciation and amortization 2,245 225 2,807 Inventory (2,609) - (5,269) Prepaid expenses 5,626 (93) (1,342) Accounts payable and accrued liabilities (189) 985 5,109 -------------------------------------------------------------------- Cash Used in Operating Activities (24,872) (19,464) (45,498) -------------------------------------------------------------------- Cash Flows from Investing Activities Additions to fixed assets (6,836) (4,048) (10,884) -------------------------------------------------------------------- Net Cash Used in Investing Activities (6,836) (4,048) (10,884) -------------------------------------------------------------------- Cash Flows From Financing Activities Issuance of common shares - 70,000 95,000 Deferred offering costs - - (14,501) Foreign currency translation adjustment 711 - (518) -------------------------------------------------------------------- Net Cash Provided by Financing Activities -------------------------------------------------------------------- (Decrease) Increase in Cash Cash, Beginning Of Period 54,596 25,085 - -------------------------------------------------------------------- Cash, End Of Period $ 23,599 $ 71,573 $ 23,599 ==================================================================== 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) STATEMENT OF STOCKHOLDERS' EQUITY For the Period from November 18, 2005 (Date of Inception) to August 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 20, 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 - - - - 711 711 Net loss for the period - - - (29,945) - (29,945) --------------------------------------------------------------------------------------------------- Balance, August 31, 2007 3,200,000 $ 3,200 $ 77,299 $ (46,803) $ (518) $ 33,178 =================================================================================================== The accompanying notes are an integral part of these statements. F-6
ONLINE ORIGINALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS August 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 ("SEC") 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 Online Originals, Inc. ("The Company") was incorporated in the State of Nevada 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 FINANCIAL STATEMENTS August 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 August 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 pre- vailing 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. 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. F-8 ONLINE ORIGINALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS August 31, 2007 (Unaudited) 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 August 31, 2007 was $1,574, 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 expensed as incurred. m) Concentrations Financial instruments that potentially subject the company to concentrations of credit risk consist principally of cash and cash equivalents. At August 31, 2007, the Company had $995 US Funds in deposit in a business bank account which is not insured and US equivalent of $22,604 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 America, which contemplates continuation of the Company as a going F-9 ONLINE ORIGINALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS August 31, 2007 (Unaudited) concern. However, the Company has minimal business operations to date and has an accumulated deficit at August 31, 2007 of approximately $46,803. 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 During the nine months ended August 31, 2007, the Company did not issue any shares of its common stock. The Company's authorized common stock consists of 75,000,000 shares with a par value of $0.001 per share. 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) - August 31, 2007 46,803 2028 11,701 (11,701) (7,486) -
Income taxes at the statutory rate are reconciled to the Company's actual income taxes as follows: F-10 ONLINE ORIGINALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS August 31, 2007 (Unaudited) 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 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. We also represent 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, will showcase 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. 12 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 July 23, 2007, 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. 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. 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 We are continuing the development of our website which will be ongoing over the next two (2) 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. We are continuing to contact both experienced and unpublished artists in order to introduce our marketing plan. We will continue to develop our membership program and have contacted the local tourist bureau in order to market our products though their international contacts. Expenditures We have $9,225 remaining from the net proceeds of our offering. Over the next three (3) months to November 30, 2007, our year end, we plan to concentrate on promoting and marketing our services using these available funds. We do not anticipate making any major purchases of capital assets, or conducting any research and development. 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 August 31, 2007, we had working capital of $25,102 compared to working capital of $58,926, at November 30, 2006. At August 31, 2007, our total assets consisted of cash $23,599, prepaid expenses of $1,343, inventory of $5,269 and capital assets of $8,076. 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 August 31, 2007, our total current liabilities decreased to $5,109 from $5,298 at November 30, 2006. During the nine months ended August 31, 2007, we used $6,836 in the purchase of computer equipment in connection with our ongoing operations. We have had $314 in revenue from inception. Our short and long term survival is dependent on funding from sales of securities as necessary or from shareholder loans. 13 Result of Operations We recognized a net loss of $6,628 for the nine months ended August 31, 2007 compared to a net loss of $4,541 for the nine months ended August 31, 2006. The increase of $2,087 was due to an increase in expenses. The principal components of losses were professional fees of $23,842, marketing costs of $8,462, office and administration expenses of $4,933, consulting fees of $6,300, depreciation and amortization of $2,807, organizational costs of $665 and cost of good sold of $110. At August 31, 2007, our net cash balance is $23,599. 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 to November 30, 2007 due to increased operation activities, our year end. 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 August 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). 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. Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. 14 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. Exhibit Number Description 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. 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 15th day of October, 2007. ONLINE ORIGINALS, INC. Date: October 15, 2007 By: /s/ Gaye Adams -------------- Name: Gaye Adams Title: President/CEO, principal executive officer Date: October 15, 2007 By: /s/ Gregory Adams ----------------- Name: Gregory Adams Title: Chief Financial Officer, principal financial officer and principal accounting officer 16