U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
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Commission file number 0-32137
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Online Vacation Center Holdings Corp.
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(Name of Small Business Issuer in its Charter)
Florida 65-0701352
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1801 N.W. 66th Avenue, Suite 102, Plantation 33313
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(Address of Principal Executive Offices) (Zip Code)
954-377-6400
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(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value
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(Title of Class)
Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]
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. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
State issuer's revenues for its most recent fiscal year. $2,587,244
State the aggregate market value of the voting stock held by non-affiliates
(1,529,077 shares) computed by reference to the price at which the stock was
sold, or the average bid and asked prices of such stock, as of a specified date
within the past 60 days ($1.70 on March 21, 2006). $2,599,430.90.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: March 21, 2006: 16,806,777 Shares of
Common Stock.
Transitional Small Business Disclosure Format (Check One):
Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
-- None -
TABLE OF CONTENTS
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Page
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PART I
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Item 1 Description of Business............................................................ 1
Item 2 Description of Property............................................................ 3
Item 3 Legal Proceedings.................................................................. 3
Item 4 Submissions of Matters to a Vote of Security Holders............................... 3
PART II
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Item 5 Market for Common Equity, Related Stockholder Matters
And Small Business Issuer Purchases of Equity Securities......................... 4
Item 6 Management's Discussion and Analysis or Plan of Operation.......................... 4
Item 7 Financial Statements............................................................... 13
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............................................. 14
Item 8A Controls and Procedures............................................................ 14
Item 8B Other information.................................................................. 14
PART III
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Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act................................ 15
Item 10 Executive Compensation............................................................. 17
Item 11 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters....................................... 19
Item 12 Certain Relationships and Related Transactions..................................... 21
Item 13 Exhibits........................................................................... 21
Item 14 Principal Accounting Fees and Services............................................. 22
PART I
Item 1. Description of Business.
General
The Company was organized under the laws of the State of Florida on
July 15, 1996 under the name Alec Bradley Cigar Corporation. From inception
through March 15, 2006, the Company was an importer and distributor of cigars.
Since inception, the Company did not have cash flow or borrowing capacity
sufficient to pay for the costs and fees of expanding its operations. Moreover,
because of illiquidity in its stock, the Company's stock was not sufficiently
attractive to serve as currency to fund its growth. As an OTCBB quoted company,
the Company was unable to raise capital through equity offerings because it has
had no institutional interest in its stock. Having determined that it no longer
had a ready means by which to fund future growth central to its business plan,
the board of directors has determined that it was in the Company's best
interests to dispose of all or substantially all of its cigar operations. The
board of directors believed that if a reverse merger was completed, the
Company's shareholders would be more likely to realize increased value because
its share price may increase as a result of the business and results of the
operations of the surviving entity.
Subsequent Event
Effective March 15, 2006 the following actions were completed by the
Company: (1) the sale of substantially all the assets of the Company by selling
its cigar operations pursuant to the terms of an asset purchase agreement
between Alec Bradley Cigar Corporation and Alan Rubin and a share exchange
agreement with Online Vacation Center Holdings, Inc.; (2) amendment to the
Company's articles of incorporation to eliminate preemptive rights provided to
its shareholders; (3) amendment to the Company's articles of incorporation to
change its name to Online Vacation Center Holdings Corp.; (4) amendment to the
Company's articles of incorporation to increase its authorized common stock to
80,000,000 shares; and (5) adoption of the 2005 Management and Director Equity
Incentive and Compensation Plan.
Under a share exchange agreement dated August 25, 2005, effective March
15, 2006, the Company has issued to the Online Vacation Center Holdings, Inc.
interest holders an aggregate of 15,000,000 shares of the Company's common stock
in exchange for a 100% interest in Online Vacation Center Holdings, Inc. In
connection with the share exchange, pursuant to an asset purchase agreement, the
Company sold all of its assets (and transferred all of its liabilities) to Alan
Rubin for a total purchase price of 2,700,000 shares of the Company's common
stock. The 2,700,000 shares were returned to the Company and have been
cancelled. Mr. Rubin was the principal shareholder and sole executive officer
and director of the Company. The closing of the asset purchase agreement was a
condition of the share exchange with Online Vacation Center Holdings, Inc.
Immediately following the effectiveness of the share exchange there were
16,799,777 shares of the Company's common stock outstanding.
For accounting purposes the consummation of these actions resulted in a
reverse merger and Online Vacation Center Holdings, Inc. is the accounting
survivor and surviving business entity; however, the Company is the surviving
legal entity. Online Vacation Center Holdings, Inc. is an internet-based
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vacation seller focused on serving the affluent retiree market. A description of
Online Vacation Center Holdings, Inc. is contained within the Company's Form
8-K/A current report filed with the SEC on March 21, 2006.
Description of Fiscal Year 2005 Operations
The Company was a cigar importer and distributor. The Company imported
and distributed several cigar lines. The Company primarily sold to two types of
customers: (1) distributors, including wine and liquor wholesalers; and (2)
retailers, which includes tobacco shops, convenience stores, bars, restaurants
and country clubs.
Purchasing and Distribution
The Company purchased and imported the majority of its cigars from
cigar manufacturing plants in Honduras, Nicaragua and the Dominican Republic.
Occidental Cigar Corporation, the Company's supplier from the Dominican
Republic, is a leading manufacturer of premium cigars. They produce the
Company's Occidental Reserve, Special Blends and Havana Sun Grown cigar lines.
Located in Santiago, Dominican Republic, Occidental Cigar Corporation occupies a
20,000 square foot building and produces 15,000,000 cigars annually. Tabacalera
Endemano, located in Danli, Honduras, was the Company's supplier of the
Company's Spirit of Cuba cigars. Latin Cigars de Honduras, located in Danli,
Honduras was the Company's supplier of the Trilogy, Ovation Maduro and Cameroon
lines. The Company did not have any agreements with cigar manufacturers.
Purchases were made on a per order basis. The Company paid all shipping costs.
Customers
In 2005 the Company's customer base was approximately 1,000 customers.
In 2005, the Company's 3 largest customers accounted for an aggregate of
approximately 15% of total sales. None accounted for more than 10% of total
sales.
Competition
The Company experienced intense competition with respect to its cigar
distribution. The cigar distribution industry is highly competitive. The Company
believes that as a distributor of premium cigars, it competed with a smaller
number of domestic and foreign companies that specialized in premium cigars, and
certain larger companies that maintain premium cigar lines, including Altadis
and Swedish Match.
Government Regulation
The Company as an importer of cigars was required to have an importer
permit from the Department of the Treasury, Bureau of Alcohol, Tobacco and
Firearms. The Company applied for and was granted Permit Number FL-TI-127.
Research and Development
The Company was not involved in any research and development projects
over the past two years.
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Employees
At December 31, 2005, the Company employed five individuals and had
nine independent sales representatives. Of its employees, two were engaged in
sales and marketing; two in executive and administrative roles; and the
remaining employee is engaged in shipping and receiving. None of the Company's
employees were covered by any labor union.
Trademarks
The Company trademarked the name Bogey's Stogies. The Company applied
for other trademarks for the cigars it distributes including Occidental Reserve,
Trilogy, Spirit of Cuba, Special Blends, Double Broadleaf, Pryme, and Havana Sun
Grown, but these applications are pending.
Item 2. Description of Property.
During the second fiscal quarter 2004 the Company entered into a lease
agreement for office and warehouse facilities. Payments under the lease
agreement for 2005 were a total of $36,000.
Item 3. Legal Proceedings.
The Company was not a party to any legal proceeding during 2005.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
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PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities
Market for Common Equity
The Company's Common Stock was quoted on the OTC Bulletin Board under
the symbol ABDC until March 16, 2006. Subsequent to the period covered by this
report and pursuant to the share exchange agreement discussed under "Subsequent
Event", the Company changed its name to Online Vacation Center Holdings Corp.
and its quotation symbol changed to ONVC. Historically the stock is thinly
traded and transactions in the stock are sporadic and infrequent. The following
table sets forth the high and low bid quotations for the Company's common stock
for the periods indicated. These quotations, as reported by the NASD, reflect
prices between dealers, do not include retail mark-ups, markdowns, commissions
and may not necessarily represent actual transactions.
Period High Low
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Three Months Ended March 31, 2004 $0.18 $0.04
Three Months Ended June 30, 2004 $0.20 $0.10
Three Months Ended September 30, 2004 $0.20 $0.05
Three Months Ended December 31, 2004 $0.25 $0.10
Three Months Ended March 31, 2005 $0.35 $0.06
Three Months Ended June 30, 2005 $0.20 $0.15
Three Months Ended September 30, 2005 $0.73 $0.13
Three Months Ended December 31, 2005 $1.01 $0.45
As of January 30, 2006, there were approximately 30 holders of record
of the Company's common stock. Additionally, the Company estimates that there
are approximately 100 holders of its common stock, either of record or through a
broker, bank or other nominee.
The Company has never paid a cash dividend on its common stock nor does
the Company anticipate paying cash dividends on its common stock in the near
future. It is the present policy of the Company not to pay cash dividends on the
common stock but to retain earnings, if any, to fund growth and expansion. Any
payment of cash dividends on the common stock in the future will be dependent
upon the Company's financial condition, results of operations, current and
anticipated cash requirements, plan for expansion, as well as other factors the
board of directors deems relevant.
Related Stockholder Matters and Small Business Issuer Purchases of Equity
Securities
None.
Item 6. Management's Discussion and Analysis or Plan of Operation
Introduction
The following discussion is based upon, and should be read in
conjunction with, the audited consolidated financial statements of the Company
as of and for the years ended December 31, 2005 and 2004, together with the
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notes to the financial statements. The information contained herein pertains to
the Company's operations prior to its reverse merger and does not relate to its
current operations. Audited financial information for Online Vacation Center
Holdings, Inc.'s fiscal year ended December 31, 2005 and related management's
discussion and analysis is contained under the Company's Form 8-K/A Current
Report filed with the SEC on March 21, 2006.
Results of Operations
Year ended December 31, 2005 as compared to year ended December 31, 2004
Revenues
Revenues for 2005 were $2,587,244, an increase of $194,386 or 8.1% from
$2,392,858 for 2004. The Company introduced the Medalist line in 2005, which
combined with the continued success of its Pryme and Spirit of Cuba lines
introduced in 2004, accounted for the increased sales of the Company. While
gross volume remained relatively flat, the Company had an increase in sales of
the number of units resulting from the sale of lower cost cigars. The Company's
gross profit was $950,200, an increase of $8,300, or less than 1%, from $941,900
in 2004.
Selling Expenses
Selling expenses for 2005 were $421,629, an increase of $19,034, or
4.7%, from $402,595 in 2004. Selling expenses include all compensation and
related benefits for the sales personnel and advertising and promotional costs.
The increase in selling expenses was primarily attributable to the increase in
advertising costs of approximately $38,000 in 2005 as compared to 2004. Selling
expenses represented 16.2% of revenues in 2005, compared to 16.9% in 2004.
General and administrative expenses
General and administrative expenses for 2005 were $504,508, an increase
of $63,192, or 14.3%, from $441,316 in 2004. General and administrative expenses
primarily include salaries, supplies, and general operating expenses. The
increase in general and administrative expenses is attributable to the increases
in rent and occupancy costs of approximately $11,000, professional fees of
approximately $10,000, local travel of approximately $10,000 and payroll and
related taxes of approximately $11,000. General and administrative expenses
represented 19.5% of revenues in 2005, compared to 18.4% in 2004.
Liquidity and Capital Resources
During 2005, cash provided by operations was $63,111 and primarily
resulted from increases in accounts payable of $156,124, a reduction in prepaid
expenses of $56,409, net income of 18,847, plus the effect of non-cash items
(depreciation expense) of $4,196. This was partially offset by increases in
accounts receivable of $62,250 and inventory of $107,635. The Company's cash
balance as of December 31, 2005 decreased by $21,889 from December 31, 2004 to
$91,728.
The Company's working capital was approximately $305,200 at December
31, 2005, compared to approximately $282,200 at December 31, 2004. The increase
in working capital was primarily attributable to the Company's net income from
2005 of approximately $18,800.
5
The Company has negotiated with major suppliers extended credit terms
for new products being developed through these suppliers. The Company received
an unsecured term loan from Alan Rubin, its sole officer and director in the
amount of $150,474. This loan is repaid in monthly installments of principal and
interest. The balance of the loan was $35,474 as of December 31, 2005.
At December 31, 2005, management of the Company believed that the cash
generated from the Company's operations and the existing credit terms would be
adequate to support its short-term cash requirements for capital expenditures
and maintenance of working capital.
Subsequent to the period covered by this report and effective March 15,
2006 the following actions were completed by the Company:
* the sale of substantially all the assets of the Company by
selling its cigar operations pursuant to the terms of an asset
purchase agreement between Alec Bradley Cigar Corporation and
Alan Rubin in connection with the acquisition of Online Vacation
Center Holdings, Inc.;
* amendment to the Company's articles of incorporation to
eliminate preemptive rights provided to its shareholders;
* amendment to the Company's articles of incorporation to change
its name to Online Vacation Center Holdings Corp.;
* amendment to the Company's articles of incorporation to increase
its authorized common stock to 80,000,000 shares; and
* adoption of the 2005 Management and Director Equity Incentive
and Compensation Plan.
For accounting purposes the consummation of these actions resulted in a
"reverse merger" and Online Vacation Center Holdings, Inc. is the surviving
business entity, but the Company is the surviving legal entity. Online Vacation
Center Holdings, Inc. is an internet-based vacation seller, focused primarily on
selling cruises to its customers through its toll-free number and website.
Online Vacation Center Holdings, Inc. operates a reservation center in
Plantation, Florida. Online Vacation Center Holdings, Inc. acts as a broker for
travel arrangements; it has no costs and/or risks associated with unsold travel
packages. Online Vacation Center Holdings, Inc. generates revenues from:
commissions on cruises; commissions on other travel related products;
commissions on travel insurance; and marketing performed for travel suppliers.
Online Vacation Center Holdings, Inc. currently markets its services
by: telemarketing to its existing customer base; direct mailing to its existing
customer base as well as targeted prospects; and email blasting to its opt-in
subscription base.
Online Vacation Center Holdings, Inc.'s operating expenses include
primarily those items necessary to advertise its services, maintain and staff
its travel reservation and fulfillment center including technological
enhancements, payroll, commissions and benefits, telephone, ticket delivery,
general and administrative expenses including rent and computer maintenance
fees; and interest, fees and expenses associated with financing activities.
Online Vacation Center Holdings, Inc. expects to continue to incur additional
operating and selling expenses now that it is a SEC reporting company and moves
forward with its growth strategy.
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Accounting Policies
Basis of Accounting: The financial statements are prepared using the
accrual basis of accounting where revenues are recognized upon shipment of
merchandise to customers and expenses are recognized in the period in which they
are incurred. This basis of accounting conforms to accounting principles
generally accepted in the United States of America.
Inventories: Inventories consists primarily of cigars, humidors,
displays, boxes and labels and is stated at the lower of cost or market value
using the first in, first out (FIFO) method of accounting.
Furniture and Equipment: Furniture and equipment are recorded at cost,
net of accumulated depreciation. Depreciation expense is computed using the
straight-line method of accounting over the estimated useful lives of the assets
ranging from five to seven years.
Impairment of Long Lived Assets and Long Lived Assets to be Disposed
Of: In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" which supersedes both SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and the accounting and reporting provisions of Accounting
Practice Bulletin ("APB") Opinion No. 30, "Reporting the Results of Operations
-- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
the disposal of a segment of a business (as previously defined in that opinion).
This statement establishes the accounting model for long-lived assets
to be disposed of by sale and applies to all long-lived assets, including
discontinued operations. This statement requires those long-lived assets be
measured at the lower of carrying amount or fair value less cost to sell,
whether reported in continuing operations or discontinued operations. Therefore,
discontinued operations will no longer be measured at net realizable value or
include amounts for operating losses that have not yet occurred. The Company
adopted SFAS No. 144 in the fiscal year ending October 31, 2002. SFAS No. 144
retains the fundamental provisions of SFAS No. 121 for recognizing and measuring
impairment losses on long-lived assets held for use and long-lived assets to be
disposed of by sale, while also resolving significant implementation issues
associated with SFAS No. 121.
Intangible Assets: The Company accounts for intangible assets in
accordance with SFAS 142. Generally, intangible assets with indefinite lives,
and goodwill, are no longer amortized; they are carried at lower of cost or
market and subject to annual impairment evaluation, or interim impairment
evaluation if an interim triggering event occurs, using a new fair market value
method. Intangible assets with finite lives are amortized over those lives, with
no stipulated maximum, and an impairment test is performed only when a
triggering event occurs. Such assets are amortized on a straight-line basis over
the estimated useful life of the asset. Intangible assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the fair value is less than the
carrying amount of the asset, an impairment loss is then recognized.
Intangible assets consists primarily of trademarks, whereby the Company
incurred registration and legal fees of approximately $15,000 to license the
trademark.
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Income Taxes: The Company uses the asset and liability method of
accounting for income taxes as required by Statement of Financial Accounting
Standards ("SFAS") No. 109, Accounting for Income Taxes. SFAS No. 109 requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amounts and the
tax basis of certain assets and liabilities. Deferred income taxes are measured
by the current enacted tax rates. Deferred tax expense (benefit) is the result
of changes in the deferred tax asset and liability. Valuation allowances are
used to reduce deferred tax assets to the amount considered likely to be
realized.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the date of
these financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Critical Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has recently issued
several new accounting pronouncements, which may apply, to the Company.
In December 2004, the Financial Accounting Standards Board ("FASB")
issued the SFAS No. 123(R), "Share-Based Payment" ("SFAS 123(R)"), which
replaced SFAS No. 123, "Accounting for Stock-Based Compensation," and superseded
APB Opinion 25, "Accounting for Stock Issued to Employees." SFAS 123(R) requires
that all share-based payments to employees be recognized in the financial
statements based on their fair values on the date of grant. The Company
currently uses the intrinsic value method to measure compensation expense for
stock-based awards. On April 14, 2005, the SEC amended the compliance dates for
SFAS 123(R), which extended the Company's required adoption dated of SFAS 123(R)
to its fiscal third quarter in its fiscal year ended June 30, 2006. The Company
is evaluating the requirements of SFAS 123(R) and expects that's its adoption
will not have a material impact on its financial position or results of
operations and earnings per share.
Also in December 2004, the FASB issued Statement No. 153, "Exchanges of
Nonmonetary Assets" ("SFAS No. 153"), which addresses the measurement of
exchanges of nonmonetary assets and eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets and replaces
it with an exception for exchanges that do not have commercial substance. SFAS
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005, with earlier application permitted. The adoption
of SFAS No. 153 will have no impact on the Company's results of operations or
its financial position.
In June 2005, the FASB issued Statement No. 154, "Accounting Changes
and Error Corrections" ("SFAS No 154"), which changes the requirements for
accounting for and reporting of a change in accounting principle. SFAS No. 154
requires retrospective application to prior periods' financial statements of a
voluntary change in accounting principle unless it is impracticable. SFAS No. 54
also requires that a change in method of depreciation, amortization, or
depletion for long-lived, non-financial assets be accounted for as a change in
accounting estimate that is affected by a change in accounting principle. SFAS
No. 154 is effective for accounting changes and corrections of errors made a
fiscal years beginning after December 15, 2005, but does not change the
transition provisions of any existing accounting pronouncements, including those
that are in a transition phase as of the effective date of the Statement. The
8
adoption of SFAS No. 154 will not have a material effect on results of
operations or the Company's financial position.
Off Balance Sheet Arrangements
None.
Risk Factors
The following risk factors pertain to the Company's operations
following the reverse merger. As previously disclosed, effective March 15, 2006,
Online Vacation Center Holdings, Inc. became the accounting survivor of the
Company and surviving business entity. Effective March 15, 2006, the Company is
the surviving legal entity and Online Vacation Center Holdings, Inc. is a wholly
owned subsidiary of the Company.
The Company's growth strategy is based on a merger and acquisition strategy and
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there can be no assurance that the Company will be able to identify, acquire or
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profitably manage additional businesses or successfully integrate acquired
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businesses into the Company without substantial costs, delays or other
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operational or financial problems.
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The Company intends to increase its revenues, expand the markets it
serves and increase its services through the acquisition or merger of additional
operating companies. There can be no assurance that the Company will be able to
identify, acquire or profitably manage additional businesses or successfully
integrate acquired businesses into the Company without substantial costs, delays
or other operational or financial problems. Increased competition for
acquisition or merger candidates may develop, in which event there may be fewer
acquisition and merger opportunities available to the Company, as well as higher
acquisition or merger prices. Further, acquisitions and mergers involve a number
of special risks, including possible adverse effects on the Company's operating
results, diversion of management's attention, failure to retain key personnel,
risks associated with unanticipated events or liabilities and amortization of
acquired intangible assets, some or all of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
Customer dissatisfaction or performance problems at a single acquired company
could also have an adverse effect on the reputation of the Company The Company
may also seek international acquisitions that may be subject to additional risks
associated with doing business in foreign countries. In addition, there can be
no assurance that businesses acquired will achieve anticipated revenues and
earnings.
Since the Company may finance future acquisitions and mergers in part by using
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shares of common stock for the consideration to be paid, if in the event that
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the common stock does not maintain a sufficient market value, or potential
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acquisition and merger candidates are otherwise unwilling to accept common stock
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as the consideration for the sale of their businesses, the Company may be
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required to issue additional shares of stock or utilize more of its cash
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resources, if available, in order to maintain its acquisition program.
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9
The Company may finance future acquisitions by using shares of common
stock for the consideration to be paid. In the event that the common stock does
not maintain a sufficient market value, or potential acquisition and merger
candidates are otherwise unwilling to accept common stock as part of the
consideration for the sale of their businesses, the Company may be required to
utilize more of its cash resources, if available, in order to maintain its
expansion program. If the Company has insufficient cash resources, its growth
could be limited unless it is able to obtain additional capital through debt or
equity financings. There can be no assurance that other financing will be
available on terms the Company deems acceptable or if at all. If the Company is
unable to obtain financing sufficient for all of its desired acquisitions and
mergers, it may be unable to fully carry out its expansion strategy. If funding
is insufficient, the Company may be required to delay, reduce the scope of, or
eliminate some or all of its expansion programs.
The Company's common stock has not historically been sufficient to
serve as currency because its common stock has historically traded at less than
$1.00 per share with limited liquidity. The Company believes that the new
business and potential growth for the surviving business operations will
generate greater investor interest and increased liquidity in the publicly
trading stock, making it more attractive to serve as currency for the surviving
company. The Company believes that national online travel services will generate
significantly more investor interest than a regional cigar distribution company.
However, if the stock trades at historical levels with limited liquidity, the
Company may be unable to make future acquisitions or may be required to change
its acquisition strategy.
The Company is dependent upon travel providers for access to their inventory and
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the loss of a contract, changes in the Company's pricing agreements or
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commission schedules or more restricted access to travel providers' inventory
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could materially decrease the Company's margins and have a negative effect on
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the Company's business, financial condition and results of operations.
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The Company is dependent upon travel providers for access to their
inventory. Other distributors may have similar arrangements with travel
providers, some of which may provide better availability or more competitive
pricing than that offered by the Company. The Company anticipates that a
significant portion of its revenues will continue to be derived from the sale of
inventory for relatively few travel providers. The Company's agreements with its
travel providers can generally be canceled or modified by the travel provider
upon relatively short notice. The loss of a contract, changes in the Company's
pricing agreements or commission schedules or more restricted access to travel
providers' inventory could have a material adverse effect on the Company's
business, financial condition and results of operations.
There can be no assurance that the Company will be able to successfully
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integrate the operations of future acquisitions and mergers or institute the
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necessary company-wide systems and procedures to successfully manage the
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combined enterprise on a profitable basis.
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The Company will rely on the existing reporting systems of future
acquisitions and mergers for financial reporting. There can be no assurance that
the management group will be able to continue to effectively manage the combined
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entity or effectively implement and carry out the Company's internal growth
strategy and expansion program. The inability of the Company to successfully
integrate future acquisitions and mergers would have a material adverse effect
on the Company's business, financial condition and results of operations, and
would make it unlikely that the Company's expansion program will continue to be
successful. Further, there can be no assurance that the Company's strategy to
become the leading specialized distributor of leisure travel services will be
successful, or that the travelers or travel providers will accept the Company as
a distributor of a variety of specialized travel services.
The Company's business is currently dependent upon a number of different
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information and telecommunication technologies and any failure of this
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technology would decrease the Company's revenues.
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The Company's business is currently dependent upon a number of
different information and telecommunication technologies to facilitate its
access to information and manage a high volume of inbound and outbound calls.
Any failure of this technology would have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company is dependent upon certain third party vendors, for access to certain
information. Any failure of these systems or restricted access by the Company
would have a material adverse effect on the Company's business, financial
condition and results of operations.
There can be no assurance that the Company's systems, procedures and controls
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will be adequate to support the Company's operations as it expands which could
------------------------------------------------------------------------------
significantly increase the Company's expenses and delay or prevent growth.
--------------------------------------------------------------------------
The Company expects to continue to grow internally and through
acquisitions and mergers. The Company expects to spend significant time and
effort expanding existing businesses and identifying, completing and integrating
acquisitions and mergers. There can be no assurance that the Company's systems,
procedures and controls will be adequate to support the Company's operations as
they expand. Any future growth also will impose significant added
responsibilities on members of senior management, including the need to
identify, recruit and integrate new senior level managers and executives. There
can be no assurance that such additional management will be identified or
retained by the Company. To the extent that the Company is unable to manage its
growth efficiently and effectively, or is unable to attract and retain qualified
management, the Company's business, financial condition and results of
operations could be materially adversely affected. While Online Vacation Center
Holdings, Inc. has experienced revenue and earnings growth over the past few
years, there can be no assurance that the Company will continue to experience
internal growth comparable to these levels, if at all. Factors affecting the
ability of the Company to continue to experience internal growth include, but
are not limited to, the ability to expand the travel services offered, the
continued relationships with certain travel providers and travel agents, the
ability to recruit and retain qualified sales personnel and the ability to
cross-sell services within the Company.
11
The Company's revenues and earnings are especially sensitive to global events
-----------------------------------------------------------------------------
that are out of its control.
----------------------------
The Company's results of operations are dependent upon factors
generally affecting the travel industry. The Company's revenues and earnings are
especially sensitive to events that affect domestic and international air travel
and vacation. A number of factors could result in an overall decline in demand
for travel, including political instability, armed hostilities, international
terrorism, extreme weather conditions, a rise in fuel prices, a decline in the
value of the U.S. dollar, labor disturbances, excessive inflation, a general
weakening in economic activity and reduced employment in the U.S. These types of
events could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's financial results will be materially impacted by income taxes in
------------------------------------------------------------------------------
the future.
-----------
Online Vacation Center Holdings, Inc. has significant deferred tax
assets, resulting from domestic net operating loss carryforwards ("NOLs"). SFAS
No. 109, "Accounting for Income Taxes," requires that the Company record a
valuation allowance when it is "more likely than not that some portion or all of
the deferred tax assets will not be realized." At December 31, 2002, Online
Center Vacation Holdings, Inc. recorded a valuation allowance for 80% of the
gross deferred tax asset. Online Center Vacation Holdings, Inc. decreased the
valuation allowance in 2003, 2004, and the first quarter of 2005. At June 30,
2005, Online Vacation Center Holdings, Inc. management concluded that it was no
longer more likely than not that a portion of the deferred tax asset would not
be realized and consequently, Online Vacation Center Holdings, Inc. removed the
valuation allowance. Accordingly, Online Vacation Center Holdings, Inc. recorded
a net non-cash tax benefit in the quarter ended June 30, 2005 of $644,000,
resulting primarily from the effect of a $1 million reversal of the valuation
allowance on its deferred tax assets, partly offset by a $363,000 non-cash U.S.
income tax provision. In reporting periods subsequent to the reversal of the
valuation allowance, the Company's reported financial results will include a
substantially non-cash provision for income taxes based upon the full prevailing
blended federal and state tax rates. As a result, the Company's future reported
net income and earnings per share will be materially negatively impacted.
The domestic and international leisure travel industry is seasonal and subject
------------------------------------------------------------------------------
to quarterly fluctuations caused primarily by the seasonal variations in the
----------------------------------------------------------------------------
travel industry, which could have a negative effect on the Company's quarterly
------------------------------------------------------------------------------
results of operations.
---------------------
The domestic and international leisure travel industry is seasonal. The
results of Online Vacation Center Holdings, Inc.'s have been subject to
quarterly fluctuations caused primarily by the seasonal variations in the travel
industry. Net revenues and net income are generally higher in the second and
fourth quarters. The Company expects seasonality to continue in the future. The
Company's quarterly results of operations may also be subject to fluctuations as
a result of the timing and cost of acquisitions and mergers, changes in the mix
of services offered by the Company as a result of acquisitions and mergers,
internal growth rates, fare wars by travel providers, changes in relationships
12
with certain travel providers, the timing of the payment of overrides by travel
providers, extreme weather conditions or other factors affecting travel.
Unexpected variations in quarterly results could also adversely affect the price
of the common stock, which in turn could limit the ability of the Company to
expand.
The travel service industry is extremely competitive and has low barriers to
----------------------------------------------------------------------------
entry.
------
The travel service industry is extremely competitive and has low
barriers to entry. The Company competes with other distributors of travel
services, travel providers, travel agents, tour operators and central
reservation service providers, some of which have greater experience, brand name
recognition and/or financial resources than the Company. The Company's travel
providers may decide to compete more directly with the Company and restrict the
availability and/or preferential pricing of their capacity. In addition, other
distributors may have relationships with certain travel providers providing
better availability or more competitive pricing than that offered by the
Company. Furthermore, some travel agents have a strong presence in their
geographic area, which may make it difficult for the Company to attract
customers in those areas.
The Company's operations are dependent on the efforts and relationships of
--------------------------------------------------------------------------
Edward Rudner and will be dependent on the efforts and relationships of the
---------------------------------------------------------------------------
principals of future acquisitions and mergers. If Mr. Rudner or any of these
----------------------------------------------------------------------------
principals become unable to continue in their role with the Company, the
------------------------------------------------------------------------
Company's business could be adversely affected.
-----------------------------------------------
The Company's operations are dependent on the efforts and relationships
of Edward Rudner. Furthermore, the Company will likely be dependent on the
senior management of any businesses acquired in the future. If any of these
individuals become unable to continue in their role the Company's business or
prospects could be adversely affected. Although the Company has entered into an
employment agreement with Mr. Rudner, there can be no assurance that he will
continue in his present capacity for any particular period of time.
Subsequent to the acquisition of Online Vacation Center Holdings, Inc. Edward
-----------------------------------------------------------------------------
Rudner has the ability to control the Company's business and corporate affairs.
-------------------------------------------------------------------------------
Edward Rudner and his affiliates beneficially own shares of common
stock representing approximately 61% of the total voting power of the common
stock of the Company. Mr. Rudner will be able to exercise control over the
Company's affairs and be able to elect the entire board of directors and to
control the disposition of any matter submitted to a vote of stockholders.
Item 7. Financial Statements.
The information required by Item 310(a) of Regulation S-B is included
herein elsewhere in this report.
13
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 8A. Controls and Procedures.
Evaluation of disclosure controls and procedures
As of the end of the period covered by this report, the Company carried
out an evaluation of the effectiveness of the design and operation of its
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. This
evaluation was done under the supervision and with the participation of the
Company's Principal Executive Officer and Principal Financial Officer. Based
upon that evaluation, the Principal Executive Officer and Principal Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in gathering, analyzing and disclosing information needed to satisfy
the Company's disclosure obligations under the Exchange Act.
Changes in internal controls
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect those controls since the most
recent evaluation of such controls.
Item 8B. Other Information
None.
14
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The directors and executive officers of the Company during the period
covered by this report were as follows:
Name Age Positions Held
---- --- --------------
Alan V. Rubin 44 Director, Chief Executive Officer,
President and Principal Financial Officer
Alan Rubin has served as a director and officer of the Company since
its inception. Alan Rubin served as vice president of All Point Screw Bolt &
Specialty Co., a distributor and direct importer of fasteners and building
products from 1984 to 1996. Mr. Rubin attended the University of Florida.
The Company's directors are elected at the annual meeting of
stockholders and hold office for one year and until their successors are elected
and qualified. The Company's officers are appointed by the Board of Directors
and serve at the pleasure of the Board.
Subsequent to the period covered by this report, on March 15, 2006, as
a result of the asset sale and share exchange, a change in control in the
Company occurred. Alan Rubin resigned as chief executive officer, chief
financial officer and director of the Company upon the effectiveness of the
share exchange. The new board of directors of the Company consists of Edward B.
Rudner, Richard Anthony McKinnon, Brian P. Froelich and Frank Bracken. These
directors will serve as directors of the Company until the next annual meeting
of shareholders and until their respective successors are elected and qualified.
The new board of directors has appointed new officers of the Company.
Biographical information concerning the new directors and officers is set forth
below:
Name Age Position
---- --- --------
Richard Anthony McKinnon 65 Chairman of the Board of Directors
Edward B. Rudner 55 Director, Chief Executive Officer,
Chief Financial Officer
Brian P. Froelich 59 Director
Frank Bracken 65 Director
Richard Anthony (Tony) McKinnon. Mr. McKinnon commenced serving as
chairman of the board of directors of the Company on the effective date of the
share exchange. With a background at senior levels in marketing and executive
management, Mr. McKinnon has accumulated over thirty years of experience in the
travel industry. His experiences include executive responsibilities at American
Airlines, Pan American World Airways, Delta Air Lines, Wyndham Resort Hotels,
USAir, American Hawaii Cruises and The Delta Queen Steamboat Company. Most
recently, McKinnon successfully developed Vacation.com, which is currently a
network of approximately 6,000 travel agencies across North America. With the
sale of Vacation.com to Amadeus, a leading global distribution system and
technology provider serving the marketing, sales and distribution needs of the
world's travel and tourism industries, Mr. McKinnon served as CEO of Amadeus'
North American Operations from 2000 through 2004. From February 2005 through
15
October 2005, he served as a senior adviser to the Seabury Group, a consulting
firm. Mr. McKinnon currently provides consulting services to travel industry
companies. He also currently serves as a director for the Baptist Foundation of
Texas, Tauck, Inc. and Ocean Air Holdings, Inc. Mr. McKinnon holds a BS from the
United States Military Academy and a JD from Emory University School of Law.
Edward B. Rudner. Mr. Rudner commenced serving as director, Chief
Executive Officer and Chief Financial Officer of the Company on the effective
date of the share exchange. Mr. Rudner has served as an executive officer and
director of Online Vacation Center Holdings, Inc. since its inception in October
2000 and commenced serving on the board of directors of the Company on the
effective date of the share exchange. Prior to founding Online Vacation Center
Holdings, Inc., Mr. Rudner served as chief financial officer and then chief
operating officer of Alamo Rent A Car. During his tenure Alamo Rent A Car
expanded from a Florida company with 400 cars to a national car rental company
with over 50,000 cars. In 1984, Mr. Rudner became President and CEO of Certified
Tours, which grew from selling 10,000 vacation packages a year to over 250,000.
In 1989, Mr. Rudner became Chairman and CEO of Renaissance Cruises, which
expanded ship assets from $60 million to over $1 billion and increased revenues
from $20 million to over $300 million by 1999. Following his departure, on
September 25, 2001, Renaissance Cruises filed for bankruptcy under Chapter 11 in
the United States Bankruptcy Court, Southern District of Florida. Renaissance
Cruises ceased operations and its assets were placed in a liquidating trust. Mr.
Rudner holds a BA in history, cum laude from the University of Massachusetts.
Brian P. Froelich. Mr. Froelich commenced serving on the board of
directors of the Company on the effective date of the share exchange. After four
years in public accounting with Arthur Anderson and Coopers and Lybrand and five
years at US Life, he founded BPF Travel in 1979. In 1984 he sold BPF Travel to
American Express. With BPF Travel's acquisition by American Express, he became
part of the senior executive team of American Express. During his tenure at
American Express, he was general manager of the domestic Travel Management
Services business. As a result of his performance he was named to the American
Express Hall of Fame. From 1999 through 2001 he served as Senior Vice President,
Consumer Travel, American Express. From 2001 through 2002 he served as president
and CEO of Allied Tours, a subsidiary of Global Vacation Group, Inc. (NYSE: GVG)
where he affected the turnaround of Allied Tours and sold it to a large European
travel company. Since 2003 he has served as president and CEO of Fenevations,
LLC, a U.S.-based manufacturer of custom windows and doors. Mr. Froelich holds a
BS in Finance from Boston College, an MBA from Rutgers University, and a JD from
Seton Hall Law School.
Frank Bracken. Following the effectiveness of the share exchange the
board of directors of the Company appointed Frank Bracken to serve as a director
of the Company. Mr. Bracken retired from Haggar Clothing Co. in 2005. He had
served as President and Chief Operating Officer of Haggar Clothing Co. since
July 20, 1994, becoming the first non-Haggar family member in the company's
75-year history to assume that responsibility. Mr. Bracken served his entire
42-year professional career at Haggar, joining the company as a management
trainee in 1963. In 1971, he was named Regional Sales Manager, in 1976 he was
named Vice President/National Sales Manager, and then earned the title of Senior
Vice President of Sales and Merchandising in 1984. In 1988, all marketing
functions were added to that responsibility and he was named Senior Vice
President of Marketing. In 1991, he added the responsibilities of Domestic and
International Manufacturing, Private Label Products and the Horizon Group,
Haggar's division for mass market retailers and was named Executive Vice
President. In 1994, he assumed the position of President and COO. Mr. Bracken
16
sits on the Chancellor's Advisory Committee at the University of North Texas
(UNT), served with the UNT's 2001 Capital Campaign, serves on the College of
Business Advisory Board, and has served on UNT's Alumni Board. He was honored as
Distinguished UNT Alumnus in 1995. He is Fund Development Chair on the National
Board for Big Brothers Big Sisters of America and serves as Board Development
Chair for Big Brothers Big Sisters of North Texas. Mr. Bracken serves on
numerous other industry and charitable boards.
Code of Ethics
During the year ended December 31, 2003, the Company adopted a Code of
Ethics. The code applies to the Company's officers and directors. The code
provides written standards that are designed to deter wrongdoing and promote:
(1) honest and ethical conduct; (2) full, fair, accurate, timely and
understandable disclosure; (3) compliance with applicable laws and regulations;
(4) prompt reporting of internal violations of the code; and (5) accountability
for the adherence to the code.
Committees
Through the period covered by this report, the Company has not
established a compensation or audit committee. The board of directors, solely
consisting of Alan Rubin, reviews the professional services provided by the
Company's independent auditors, the independence of the Company's auditors from
its management, the Company's annual financial statements and its system of
internal accounting controls. Alan Rubin does not qualify as a "financial
expert" as defined under Item 401 of Regulation S-B.
Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of its outstanding common stock to file with the SEC initial reports of
ownership and reports of changes in ownership of common stock. These persons are
required by SEC regulation to furnish the Company with copies of these reports
they file.
To the Company's knowledge, based on a review of the copies of reports
furnished to it, Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent beneficial owners were complied
with on a timely basis for the period which this report relates.
Item 10. Executive Compensation
Executive Compensation
Commencing January 2001, Mr. Rubin has been paid a weekly salary of
$2,000 as economic conditions permit the Company to do so. When the payment of
his salary was not feasible, no accrual will be made on the Company's financial
records, rather the expense will be accrued as a capital contribution.
The following table sets forth compensation awarded to, earned by or
paid to our chief executive officer and chief financial officer for the past 3
years. Pursuant to the share exchange, on March 15, 2006, Mr. Rubin resigned as
chief executive officer and chief financial officer of the Company. Edward B.
Rudner commenced serving as chief executive officer and chief financial officer
of the Company on March 15, 2006. Terms of Mr. Rudner's employment are disclosed
below.
17
Summary Compensation Table
--------------------------
Other Annual
Name Year Salary($) Bonus($) Compensation
---- ---- --------- -------- ------------
Alan Rubin 2005 $ 104,000 $ -0- $ 15,912(2)
2004 $ 104,000 $ 2,000 $ 15,912(2)
2003 $ 104,000 $ 10,000 $ 12,300(1)
(1) Mr. Rubin received approximately $525 per month for automobile lease
expenses and approximately $500 per month for automobile expense
reimbursement. In addition, the Company has paid Mr. Rubin's health
insurance.
(2) Mr. Rubin received approximately $826 per month for automobile lease
expenses and approximately $500 per month for automobile expense
reimbursement. In addition, the Company has paid Mr. Rubin's health
insurance.
Stock Options and SARs
Since inception and through the period covered by this report the
Company did not grant any stock options, restricted stock awards or stock
appreciation rights or made any long-term incentive plan payments.
Edward B. Rudner Employment Agreement
On March 16, 2006, the Company entered into an executive employment
agreement with Mr. Rudner. In consideration for serving as president and chief
executive officer, the Company will pay Mr. Rudner an initial annual base salary
of $300,000, payable bi-weekly. The base salary is subject to annual automatic
incremental increases of the greater of the percentage increase in the consumer
price index or 6% of the previous year's base salary. In addition, the Company
issued Mr. Rudner incentive stock options to purchase 300,000 shares of common
stock and nonqualified stock options to purchase 200,000 shares of common stock,
which are exercisable at $1.27 per share. All of the nonqualified stock options
and incentive stock options to purchase 100,000 shares vested immediately.
Incentive stock options to purchase 100,000 shares of common stock vest on March
15, 2007 and the remaining 100,000 incentive stock options vest on March 15,
2008. All of the options were issued under the 2005 Management and Director
Equity Incentive and Compensation Plan. Mr. Rudner also received options in
connection with his service as a director of the Company. Mr. Rudner is also
entitled to a performance-based bonus and to participate in all Company benefit
programs. Mr. Rudner is entitled to five weeks paid vacation per year,
reimbursement of all reasonable out-of-pocket business expenses, a monthly
automobile allowance of $1,500, automobile insurance coverage and reimbursement
for memberships in social, charitable or religious organizations or clubs for up
to $30,000 per year. In the event of Mr. Rudner's death or disability during the
term of the agreement, Mr. Rudner or his beneficiaries are entitled to all
compensation and benefits under his employment agreement for a period of one
year following the date of his death or disability. In the event that Mr. Rudner
is terminated "for cause", he will be entitled to receive his salary and earned
but unpaid bonuses due up to the date of termination. "Cause" is defined as
committing or participating in an injurious act of fraud or embezzlement against
18
the company; engaging in a criminal enterprise involving moral turpitude;
conviction of an act constituting a felony of a crime of violence, fraud or
dishonesty; or any attempt by Mr. Rudner to assign the employment agreement. In
the event that Mr. Rudner is terminated for any other reason other than for
cause, death or disability, he will receive all compensation and benefits under
his employment agreement for a period of three years following the date of
termination. He shall also be entitled to receive a bonus equal to the amount
received for the prior year or if no prior bonus was received, an amount equal
to $150,000, as well as all earned but unpaid bonuses from previous years. The
employment agreement also includes a one-year covenant not to compete and
non-disclosure provision. The agreement has a perpetual term of three years.
As of the effective date of the share exchange, Online Vacation Center
Holdings, Inc. had an obligation under the terms of Edward Rudner's employment
agreement with Online Vacation Center Holdings, Inc. for compensation and
benefits in the amount of $579,990. The obligation has been assumed by the
Company.
The description of Mr. Rudner's employment agreement does not purport
to be complete and is qualified in its entirety by reference to the exhibits to
the Company's Form 8-K/A current report filed on March 21, 2006.
Other Compensation to New Directors
Individuals who serve as directors of the Company following the share
exchange receive options to purchase shares of common stock of the Company in
consideration for serving on the board of directors. Messrs. Rudner and Bracken
each received options to purchase 200,000 shares of the Company's common stock
exercisable at $1.27 per share. Mr. Froelich received options to purchase
300,000 shares of the Company's common stock exercisable at $1.27 per share. Mr.
McKinnon received options to purchase 600,000 shares of common stock in
consideration for Mr. McKinnon serving as chairman of the board of directors of
the Company. These options are also exercisable at $1.27 per share. All of these
options vest after two years from the date of issuance. The options were issued
under the 2005 Management and Director Equity Incentive and Compensation Plan.
In addition, following the effective date of the share exchange, all
directors of the Company receive an annual fee of $25,000 for serving on the
board of directors. The chairman of the board of directors shall receive an
additional annual fee of $50,000.
Effective October 2005, Online Vacation Center Holdings, Inc. engaged
Mr. McKinnon to provide consulting services for Online Vacation Center Holdings,
Inc. In consideration for such services Mr. McKinnon receives a monthly fee of
$10,000. Mr. McKinnon will continue to serve as a consultant to the Company
following the effectiveness of the share exchange at the same fee rate. The term
of the arrangement is on a month-to-month basis.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
As of March 21, 2006, there were 16,806,777 shares of the Company's
Common Stock issued and outstanding. The following table sets forth information
with respect to the beneficial ownership of each class of voting securities of
the Company by: (1) each person known by the Company to be the owner of more
than 5% of the outstanding shares of any class of voting securities; (2) each
officer and director; and (3) all officers and directors as a group. Shares of
common stock subject to options currently exercisable within 60 days of the date
hereof are deemed outstanding for computing the percentage of the person holding
19
such options, but are not deemed outstanding for computing the percentage
ownership of any other person.
Beneficial Ownership
--------------------
Name and Address Shares % of Shares
---------------- ------ -----------
Alan Rubin(1) 195,000 1.2%
Edward B. Rudner 10,384,860 (2) 60.7%
Richard Anthony McKinnon 100,000 (3) *
Brian P. Froelich 20,000 (4) *
Frank Bracken -0-(8) *
Reginald Flosse(5) 3,060,050 18.2%
Pacific Tour Services, Inc.(6) 1,375,310 8.2%
William A. Cataldo(7) 2,040,290 12.1%
Deanna Rudner(9) 1,680,000 9.9%
Directors and officers following
share exchange and asset sale
as a group (4 persons) 10,504,860 (2)(3)(4)(8) 60.8%
(1) Address is 3400 S.W. 26th Terrace, Suite A-1, Dania, Florida 33312.
(2) Includes shares issued pursuant to the share exchange. Includes an
aggregate of 1,680,000 shares held in trust for the benefit of Mr.
Rudner's children and 1,680,000 shares held by Mr. Rudner's wife. Also
includes 80,000 shares that Mr. Rudner purchased privately from Bruce
Ginsberg at $.90 per share; 30,000 shares that Mr. Rudner purchased
privately from a third party shareholder at $.20 per share; and 75,000
shares of common stock that Mr. Rudner purchased privately from Pacific
Tour Services for $2.00 per share. Also includes 300,000 shares of common
stock underlying options exercisable at $1.27 per share. Excludes 800
shares of common stock issuable subject to a restricted stock grant.
Excludes 100,000 shares of common stock underlying options, which vest on
March 15, 2007, and 300,000 shares of common stock underlying options
that vest on March 15, 2008.
(3) Excludes 600,000 shares of common stock underlying options exercisable at
$1.27 per share, which vest on March 15, 2008.
(4) Excludes 300,000 shares of common stock underlying options exercisable at
$1.27 per share, which vest on March 15, 2008.
(5) Address is B.P. 21426, Papeete, Tahiti.
(6) Voting control held by William A. Cataldo. Address is Suite 912,
Executive Center, 1088 Bishop Street, Honolulu, Hawaii 96813.
(7) Includes 539,980 shares held in the Cataldo Family Trust, a trust in
which Mr. Cataldo is a beneficiary and protector. Also includes 1,375,310
shares held by Pacific Tour Services and 75,000 shares held by Cataldo
Family Partners, Ltd. Address for Mr. Cataldo is Suite 912, Executive
Center, 1088 Bishop Street, Honolulu, Hawaii 96813.
(8) Excludes 200,000 shares of common stock underlying options exercisable at
$1.27 per share, which vest on March 15, 2008.
(9) Mrs. Rudner is the wife of Edward B. Rudner. Excludes shares held by
Mr. Rudner and 840,000 shares held in trust for the benefit of the
children of Mr. and Mrs. Rudner.
* Less than 1%
Securities Authorized for Issuance Under Compensation Plans
At December 31, 2005, the Company had not authorized any equity
compensation plan, nor issued any securities pursuant to an equity plan.
20
Item 12. Certain Relationships and Related Transactions
On August 13, 2004, the Company entered into an unsecured financing
agreement with Alan Rubin. Under the agreement, the Company borrowed $150,474
and will repay the loan over a period of not more than 15 months beginning
September 2004, at a rate of at least $10,000 per month plus interest payable at
5% per annum. As of December 31, 2005, the remaining principal balance on the
loan was $35,474. Subsequent to the period covered by this report and pursuant
to the terms of the asset purchase agreement described below, Alan Rubin assumed
the obligation.
Under a share exchange agreement dated August 25, 2005, effective March
15, 2006, the Company has issued to the Online Vacation Center Holdings, Inc.
interest holders an aggregate of 15,000,000 shares of the Company's common stock
in exchange for a 100% interest in Online Vacation Center Holdings, Inc. In
connection with the share exchange and pursuant to an asset purchase agreement,
the Company sold all of its assets (and transferred all of its liabilities) to
Alan Rubin for a total purchase price of 2,700,000 shares of the Company's
common stock. The 2,700,000 shares were returned to the Company and have been
cancelled. Mr. Rubin was the principal shareholder and sole executive officer
and director of the Company. The closing of the asset purchase agreement was a
condition of the share exchange with Online Vacation Center Holdings, Inc.
Following the closing of the share exchange agreement, the Company
engaged Alan Rubin to perform certain consulting services for the Company. Mr.
Rubin will provide the following consulting services to the Company: (1)
assisting in the in the preparation and completion of the Company's SEC reports
and filings through fiscal year ended December 31, 2006; (2) assisting in the
preparation and completion of the Company's financial statements and federal and
state tax returns for tax years December 31, 2005 and December 31, 2006; (3)
cooperating with the Company in the event there are any inquiries made by the
SEC, federal and state tax agencies or employment agencies in connection with
the Company's SEC filings or tax returns; and (4) assisting in any other matter
reasonably requested by the Company. In consideration of the services the
Company has agreed to pay Mr. Rubin a consulting fee of $8,722.16 per month for
a period of six months with the initial payment due on April 15, 2006.
Item 13. Exhibits.
Exhibit
Number Description
------ -----------
3.0 Articles of Incorporation(1)
3.1 Amendment to Articles of Incorporation(1)
3.2 Bylaws(1)
14.0 Code of Ethics(3)
21 Subsidiaries(1)
31.1 Rule 13a-14(a)/15d-4(a) Certification of Principal Executive Officer
31.2 Rule 13a-14(a)/15d-4(a) Certification of Principal Financial Officer
32.1 Section 1350 Certification of Principal Executive Officer
32.2 Section 1350 Certification of Principal Financial Officer
(1) Previously filed on Form 10-SB Registration Statement dated December 19, 2000.
(2) Previously filed on Form 8-K Current Report dated March 27, 2003.
(3) Previously filed on the Annual Report on Form 10-KSB for fiscal year ended December 31, 2004
21
Item 14. Principal Accountant Fees and Services
Fees to Auditors.
Year ended December 31, 2004
Audit Fees: The aggregate fees, including expenses, billed by the
Company's principal accountant in connection with the audit of our consolidated
financial statements for the most recent fiscal year and for the review of our
financial information included in our Annual Report on Form 10-KSB; and our
quarterly reports on Form 10-QSB during the fiscal year ending December 31, 2004
was $15,630.
Audit Related Fees: The aggregate fees, including expenses, billed by
the Company's principal accountant for services reasonably related to the audit
for the year ended December 31, 2004 were $-0-.
Tax Fees: The aggregate fees, including expenses, billed by the
Company's principal accountant for tax services were $-0-.
All Other Fees: The aggregate fees, including expenses, billed for all
other services rendered to the Company by its principal accountant during year
2004 was $-0-.
Year ended December 31, 2005
Audit Fees: The aggregate fees, including expenses, billed by the
Company's principal accountant in connection with the audit of our consolidated
financial statements for the most recent fiscal year and for the review of our
financial information included in our Annual Report on Form 10-KSB; and our
quarterly reports on Form 10-QSB during the fiscal year ending December 31, 2005
was $12,000.
Audit Related Fees: The aggregate fees, including expenses, billed by
the Company's principal accountant for services reasonably related to the audit
for the year ended December 31, 2005 were $-0-.
Tax Fees: The aggregate fees, including expenses, billed by the
Company's principal accountant for tax services for the year ended December 31,
2005 were $-0-.
All Other Fees: The aggregate fees, including expenses, billed for all
other services rendered to the Company by its principal accountant during year
ended December 31, 2005 was $-0-.
The Company had no formal audit committee as of December 31, 2005. The
board of directors considered and determined that the provisions of the services
covered above are compatible with maintaining the auditor's independence.
22
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ONLINE VACATION CENTER HOLDINGS CORP.
By:/s/Edward B. Rudner
----------------------
Edward B. Rudner, Chief Executive Officer
Date: March 30, 2006
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
By:/s/Edward B. Rudner
----------------------
Edward B. Rudner, Chief Executive Officer
and Chief Financial Officer
Date: March 30, 2006
23
ALEC BRADLEY CIGAR CORPORATION
FINANCIAL STATEMENTS
CONTENTS
--------
Page
----
Report of Independent Registered Public Accounting Firm F-2
Balance Sheet F-3
Statements of Operations F-4
Statements of Changes in Shareholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7-11
Report of Independent Registered Public Accounting Firm
To the board of directors and shareholders of
Alec Bradley Cigar Corporation
Dania, Florida
We have audited the accompanying balance sheet of Alec Bradley Cigar Corporation
as of December 31, 2005 and the related statements of operations, shareholders'
equity, and cash flows for the years ended December 31, 2005 and 2004. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards of Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alec Bradley Cigar Corporation
as of December 31, 2005, and the results of its operations and its cash flows
for the years ended December 31, 2005 and 2004 in conformity with accounting
principles generally accepted in the United States.
JEWETT, SCHWARTZ & ASSOCIATES
Hollywood, Florida
March 10, 2006
F-2
ALEC BRADLEY CIGAR CORP.
Balance Sheet
As of December 31,
ASSETS
------
2005
----
Current Assets:
Cash and cash equivalents $ 91,728
Accounts receivable, net 196,287
Inventory 278,225
Prepaid expenses 44,919
--------
Total Current Assets 611,159
--------
Furniture and Equipment,net 11,694
Intangible Assets 6,410
--------
$629,263
========
LIABILITIES AND EQUITY
----------------------
Current Liabilities
Accounts payable $261,600
Loan payable officer 35,474
Taxes payable 8,915
--------
Total Current Liabilities 305,989
--------
Equity
Common Stock, $.0001 par value, 30,000,000 shares authorized
4,499,777 shares issued and outstanding 450
Paid in capital 73,510
Retained Earnings 249,314
--------
Total Equity 323,274
--------
$629,263
========
The accompanying notes are an integral part of these financial statements
F-3
ALEC BRADLEY CIGAR CORP.
Statements of Income and Retained Earnings
For the Years Ended December 31,
2005 2004
---- ----
Sales $2,587,244 $2,392,858
Cost of Sales 1,637,022 1,450,975
---------- ----------
Gross Profit 950,222 941,883
Operating Expenses
Selling 421,629 402,595
General and administrative 504,508 441,316
---------- ----------
926,137 843,911
Income from Operations Before Income Taxes 24,085 97,972
Income tax expense 5,238 24,286
---------- ----------
Net Income 18,847 73,686
Retained Earnings - Beginning of Year 230,467 156,781
---------- ----------
Retained Earnings - End of Year $ 249,314 $ 230,467
========== ==========
The accompanying notes are an integral part of these financial statements
F-4
ALEC BRADLEY CIGAR CORP.
Statement of Cash Flows
For the Years Ended December 31,
2005 2004
---- ----
Cash Flows From Operating Activities
Net Income $ 18,847 $ 73,686
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,196 4,080
Changes in current assets and liabilities:
Accounts receivable (62,250) 10,909
Inventory (107,635) 157,478
Prepaid expenses 56,409 (32,323)
Accounts payable 156,124 (286,405)
Taxes payable (2,580) (20,055)
--------- ---------
Net cash provided by (used in) operating activities 63,111 (92,630)
--------- ---------
Cash flows from investing activities
Purchase of trademarks -- (5,600)
Payment of security deposits -- (1,015)
Purchase of furniture and equipment -- (15,973)
--------- ---------
Net cash used in investing activities -- (22,588)
Cash flows from financing activities
Proceeds from line of credit -- 100,000
Repayment of line of credit -- (100,000)
Advance from shareholder -- 150,474
Repayment of note from shareholder (85,000) (30,000)
--------- ---------
Net cash flows (used in) provided by financing activities (85,000) 120,474
Net (decrease) increase in cash and cash equivalents (21,889) 5,256
Cash and cash equivalents - Beginning of Year 113,617 108,361
--------- ---------
Cash and cash equivalents - End of Year $ 91,728 $ 113,617
========= =========
The accompanying notes are an integral part of these financial statements
F-5
ALEC BRADLEY CIGAR CORP.
Statement of Changes in Stockholders' Equity
For the Years Ended December 31, 2004 and 2005
Additional Total
Number Common Paid-in Retained Stockholders'
of shares Stock Capital Earnings Equity
------------ ---------- ----------- --------- ------------
Balance at December 31, 2003 4,499,777 $ 450 $ 73,510 $ 156,781 $ 230,741
Net Income 73,686 73,686
----------- --------- --------- --------- ---------
Balance at December 31, 2004 4,499,777 450 73,510 230,467 304,427
----------- --------- --------- --------- ---------
Net Income 18,847 18,847
----------- --------- --------- --------- ---------
Balance at December 31, 2005 4,499,777 $ 450 $ 73,510 $ 249,314 $ 323,274
=========== ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements
F-6
ALEC BRADLEY CIGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2005 and 2004
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Alec Bradley Cigar Corp. (the "Company"), a Florida
corporation, was incorporated in July 1996. The Company imports and distributes
cigars throughout the Unites States and Canada, with corporate offices located
in Dania, Florida.
Basis of Accounting - The financial statements are prepared using
the accrual basis of accounting where revenues are recognized upon shipment of
merchandise to customers and expenses are recognized in the period in which they
are incurred. This basis of accounting conforms to accounting principles
generally accepted in the United States of America.
Cash and Cash Equivalents - The Company considers all highly liquid
debt securities purchased with original or remaining maturities of three months
or less to be cash equivalents. The carrying value of cash equivalents
approximates fair value.
Inventories - Inventories consists primarily of cigars, humidors,
displays, boxes and labels and is stated at the lower of cost or market value
using the first in, first out (FIFO) method of accounting.
Furniture and Equipment, net - Furniture and equipment are recorded
at cost, net of accumulated depreciation. Depreciation expense is computed using
the straight-line method of accounting over the estimated useful lives of the
assets ranging from five to seven years.
Intangible Assets, Net - The Company accounts for intangible assets
in accordance with Statement of Financial Accounting Standards "SFAS" 142.
Intangible assets with indefinite lives, and goodwill, are no longer amortized;
they are carried at lower of cost or market and subject to annual impairment
evaluation, or interim impairment evaluation if an interim triggering event
occurs, using a new fair market value method. Intangible assets with finite
lives are amortized over those lives, with no stipulated maximum, and an
impairment test is performed only when a triggering event occurs. Such assets
are amortized on a straight-line basis over the estimated useful life of the
asset. Intangible assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. If
the fair value is less than the carrying amount of the asset, an impairment loss
is then recognized.
Intangible assets consist primarily of trademarks, whereby the
Company incurred registration and legal fees of approximately $15,000 to license
these trademarks. These trademarks have estimated useful lives of 10 years.
Amortization expense for the years ended December 31, 2005 and 2004 approximated
$1,500, respectively. Estimated amortization expense for each of the years ended
December 31, 2006, 2007, and 2008 is $1500, respectively and $410 in 2009.
Revenue Recognition - Sales and the related cost of sales are
recognized upon shipment of products in accordance with the United States
Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 104.
F-7
ALEC BRADLEY CIGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2005 and 2004
The Company generally accepts returns of cigars that are stale or damaged in
transit. Sales revenue is recorded net of anticipated returns based on
historical experience. Sales returns are not material to the financial
statements.
Advertising Costs - Advertising costs are charged to expense during
the period in which they are incurred. Advertising expenses for the years ended
December 31, 2005 and 2004 approximated $102,000 and $61,000, respectively.
Income Taxes - The Company uses the asset and liability method of
accounting for income taxes as required by Statement of Financial Accounting
Standards ("SFAS") No. 109, Accounting for Income Taxes.SFAS No. 109 requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amounts and the
tax basis of certain assets and liabilities. Deferred income taxes are measured
by the current enacted tax rates. Deferred tax expense (benefit) is the result
of changes in the deferred tax asset and liability. Valuation allowances are
used to reduce deferred tax assets to the amount considered likely to be
realized.
Credit Risk - Financial instruments, which potentially subject the
Company to concentration of credit risk, consist principally of cash and trade
accounts receivable. The Company places its cash with high credit financial
institutions. However, the Company occasionally maintains cash balances in
excess of the F.D.I.C. insurance limits, thereby failing to limit the amount of
credit exposure to any one financial institution. Concentrations of credit risk
with respect to trade accounts receivable are reduced due to the Company's large
number of customers. The Company conducts ongoing credit evaluations of its
customers and generally does not require collateral or other security from these
customers.
The Company purchases and imports the majority of its cigars from
cigar manufacturing plants in Honduras and the Dominican Republic. The Company
does not have any agreements with cigar manufacturers. Purchases are made on a
per order basis. Although the Company believes there are alternative sources for
its products, a change in suppliers could cause delays in the Company's
operations, which could adversely affect its operating results.
Stock Issued For Services - The value of stock issued for services
is based on management's estimate of the fair value of the Company's stock at
the date of issue or the fair value of the services received, whichever is more
reliably measurable.
Earnings per Share - Basic and diluted earnings per common share are
based on the weighted average number of shares outstanding of 4,499,777 and
4,499,777 for the years ended December 31, 2005 and 2004, respectively. There
are no common stock equivalents or other dilutive items in the aforementioned
periods presented.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
F-8
ALEC BRADLEY CIGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2005 and 2004
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the date of
these financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Recent Authoritative Pronouncements - The Financial Accounting
Standards Board has recently issued several new accounting pronouncements that
may apply to the Company.
In December 2004, the Financial Accounting Standards Board ("FASB")
issued the SFAS No. 123(R), "Share-Based Payment" (SFAS 123(R)"), which replaced
SFAS No. 123, "Accounting for Stock-Based Compensation," and superseded APB
Opinion 25, "Accounting for Stock Issued to Employees." SFAS 123(R) requires
that all share-based payments to employees be recognized in the financial
statements based on their fair values on the date of grant. The Company
currently uses the intrinsic value method to measure compensation expense for
stock-based awards. On April 14, 2005, the SEC amended the compliance dates for
SFAS 123(R), which extended the Company's required adoption dated of SFAS 123(R)
to its fiscal third quarter in its fiscal year ended June 30, 2006. The Company
is evaluating the requirements of SFAS 123(R) and expects that's its adoption
will not have a material impact on its financial position or results of
operations and earnings per share.
Also in December 2004, the FASB issued Statement No. 153, "Exchanges
of Nonmonetary Assets" ("SFAS No. 153"), which addresses the measurement of
exchanges of nonmonetary assets and eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets and replaces
it with an exception for exchanges that do not have commercial substance. SFAS
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005, with earlier application permitted. The adoption
of SFAS No. 153 will have no impact on the Company's results of operations or
its financial position.
In June 2005, the FASB issued Statement No. 154, "Accounting Changes
and Error Corrections" (SFAS No 154"), which changes the requirements for
accounting for and reporting of a change in accounting principle. SFAS No. 154
requires retrospective application to prior periods' financial statements of a
voluntary change in accounting principle unless it is impracticable. SFAS No.154
also requires that a change in method of depreciation, amortization, or
depletion for long-lived, non-financial assets be accounted for as a change in
accounting estimate that is affected by a change in accounting principle. SFAS
No. 154 is effective for accounting changes and corrections of errors made a
fiscal years beginning after December 15, 2005, but does not change the
transition provisions of any existing accounting pronouncements, including those
that are in a transition phase as of the effective date of the Statement. The
adoption of SFAS No. 154 will not have a material effect on results of
operations or the Company's financial position.
F-9
ALEC BRADLEY CIGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2005 and 2004
NOTE 2- FURNITURE AND EQUIPMENT, NET
Furniture and equipment, net consist of the following as of
December 31,
2005
-------------
Computer and office equipment $ 23,096
Furniture and fixtures 11,106
-------------
34,202
Less accumulated depreciation 22,508
-------------
$ 11,694
=============
Depreciation expense approximated $3,194 and $2,300, for the years
ended December 31, 2005 and 2004, respectively.
NOTE 3- NOTE PAYABLE TO RELATED PARTY
On August 13, 2004 the Company entered into an unsecured financing
agreement with a shareholder and officer of the company. Under the agreement,
the Company borrowed $150,474 from the officer and will repay the loan over a
period of not more than 15 months beginning September 2004 at a rate of at least
$10,000 per month plus interest payable at 5% per annum. As of December 31, 2005
and 2004 the remaining principle balance on the loan was $35,474 and $120,474
respectively. The payment terms of the loan have been modified by agreement of
the Company and the lender to extend the repayment period up to June 30, 2006.
Interest expense paid on this loan was $3,987 and $2,232 for 2005 and 2004
respectively.
NOTE 4- INCOME TAXES
Deferred income taxes arise from timing differences resulting from income and
expense items reported for financial accounting and tax purposes in different
periods. A deferred tax asset valuation allowance is recorded when it is more
likely than not that deferred tax assets will not be realized. There are no
deferred taxes as of December 31, 2004.
The provision for income taxes is comprised of the following:
2005 2004
------------- -------------
Current federal tax provision $ 4,485 $ 22,077
Current state and local tax provision 753 2,209
------------- -------------
Total provision for income taxes $ 5,238 $ 24,286
============= =============
F-10
ALEC BRADLEY CIGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2005 and 2004
The difference between income tax expense computed by applying the
federal statutory corporate tax rate and actual income tax expense is as
follows:
2005 2004
------------- ------------
Statutory federal income tax rate 19 % 22 %
Non-deductible permanent items - % - %
State income taxes, net of federal benefit 3 % 2 %
------------- ------------
Effective income tax rate 22 % 24 %
============= ============
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Lease - In March 2004, the Company agreed to occupy office and
warehouse facilities under the terms of a three- year non-cancelable operating
lease agreement.
Future minimum payments under this non-cancelable lease are as
follows as of December 31, 2005:
Year Amount
----- ----------
2006 $ 36,000
2007 9,000
2008 and thereafter -
----------
Total minimum lease payments $ 45,000
==========
Rent expense for the years ended December 31, 2005 and 2004 was $40,577
and $30,134, respectively.
Note 6 - Subsequent Event
Subsequent to the period covered by this report and effective March 15th, 2006
the following proposals were completed by the Company:
* The sale of substantially all the assets of the Company by selling its
cigar operations pursuant to the terms of an asset purchase agreement
between Alec Bradley Cigar Corporation and Alan Rubin in connection with
the acquisition of Online Vacation Center Holdings, Inc.;
* Amendment to the Company's articles of incorporation to eliminate
preemptive rights provided to its shareholders;
* Amendment to the Company's articles of incorporation to change its name to
Online Vacation Center Holdings Corp.;
* Amendment to the Company's articles of incorporation to increase its
authorized common stock to 80,000,000 shares; and
* Adoption of the 2005 Management and Director Equity Incentive and
Compensation Plan. The consummation of these proposals resulted in a
reverse merger and Online Vacation Center is the surviving entity.
The final definitive information statement was filed with the Securities and
Exchange Commission (SEC) on January 30, 2006.
F-11