Edgar Filing: ORALABS HOLDING CORP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB

|X| Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.

For the quarterly period ended: September 30, 2006

|_| Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange Act of 1934.

For the transition period from to

COMMISSION FILE NUMBER: 000-23039

ORALABS HOLDING CORP.

(Exact name of small business issuer as specified in its charter)

Colorado 14-1623047
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

18685 East Plaza Drive, Parker, Colorado 80134
---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)

(303) 783-9499
--------------
(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

|X| Yes |_| No

Indicate by check mark whether the registrant is a shell Company (as defined in
Rule 12b-2 of The Exchange Act).

Yes |_| |X| No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:

Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 after the
distribution of securities under a plan confirmed by a court.

|_| Yes |_| No

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of September 30, 2006, the Issuer had 4,848,265 shares of common stock, $.001
Par Value, outstanding.

Transitional Small Business Disclosure Format (check one) Yes |_| |X| No

Table of Contents

Part I. Financial Information

Item 1. Financial Statement Page

Consolidated Balance Sheets as of September 30, 2006
(Unaudited) and December 31, 2005........................... 2

Consolidated Statements of Operations, Three Months
and Nine Months Ended September 30, 2006 and 2005
(Unaudited)................................................. 3

Consolidated Statement of Stockholders' Equity, Nine Months
Ended September 30, 2006 (Unaudited)........................ 4

Consolidated Statements of Cash Flows, Nine Months Ended
September 30, 2006 and 2005 (Unaudited)..................... 5

Notes to Consolidated Financial Statements................... 6-9

Item 2. Management's Discussion and Analysis of Financial
Condition And Results of Operations..................... 10-13

Item 3. Controls and Procedures.................................. 13

Part II. Other Information.......................................... 14-15

Signatures........................................................... 16

Exhibit Index........................................................ 16

ORALABS HOLDING CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

September 30, 2006 December 31, 2005
------------------- -----------------
Unaudited
Assets
Current assets

Cash and cash equivalents $ 1,204,142 $ 1,834,144
Accounts receivable-trade, net of allowance for
doubtful accounts of $68,686 (2006) and $86,639 (2005) 2,434,113 1,795,898
Inventories 3,398,068 2,555,634
Prepaid expenses 174,014 173,533
Deposits and other assets 417,907 257,949
----------------- -----------------
Total current assets 7,628,244 6,617,158
----------------- -----------------
Non-current assets
Deferred tax assets, net 179,000
Property and equipment, net 2,083,242 1,858,754
----------------- -----------------
Total non-current assets 2,083,242 2,037,754
----------------- -----------------
Total assets $ 9,711,486 $ 8,654,912
================= =================
Liabilities and Stockholders' Equity

Current liabilities
Accounts payable - trade $ 901,120 $ 1,021,153
Deferred revenue 88,848 630,000
Accrued liabilities 296,671 121,321
Reserve for returns 52,810 100,810
Income tax payable 66,211
Current portion of long-term debt 6,300 6,300
Deferred tax liability - current 248,178 221,724
----------------- -----------------
Total current liabilities 1,660,138 2,101,308
----------------- -----------------
Non-current liabilities
Long-term debt, less current portion 2,100 6,825
Deferred tax liability - long-term 63,034
----------------- -----------------
Total non-current liabilities 65,134 6,825
----------------- -----------------

Commitments and contingencies

Stockholders' equity
Preferred stock, $.001 par value, 1,000,000 shares
authorized; none issued and outstanding
Common stock, $.001 par value; 25,000,000 shares
authorized, 4,848,265 (2006) and 4,693,015 (2005)
issued and outstanding 4,848 4,693
Additional paid-in capital 2,008,141 1,511,820
Retained earnings 5,973,225 5,030,266
----------------- -----------------
Total stockholders' equity 7,986,214 6,546,779
----------------- -----------------

Total liabilities and stockholders' equity $ 9,711,486 $ 8,654,912
================= =================

See Notes to Consolidated Financial Statements

ORALABS HOLDING CORP. AND SUBSIDIARIES

Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 2006 and September 30, 2005
Unaudited

--------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
09/30/06 09/30/05 09/30/06 09/30/05
--------------------------------------------------------------------------------------------------------

Product sales, net $4,385,608 $2,944,492 $13,304,462 $9,068,516
Cost of sales 2,826,257 1,920,431 7,940,115 5,898,903
---------- ---------- ---------- ----------
Gross profit 1,559,351 1,024,061 5,364,347 3,169,613
---------- ---------- ---------- ----------
Operating Expenses:
Engineering 71,889 40,312 145,653 168,021
Selling and marketing costs 435,501 406,184 1,299,943 1,062,595
General and administrative 835,542 792,638 2,453,346 2,195,761
Other 13,404 12,768 43,462 38,675
---------- ---------- ---------- ----------
Total operating expenses 1,356,336 1,251,902 3,942,404 3,465,052
---------- ---------- ---------- ----------
Net operating income (loss) 203,015 (227,841) 1,421,943 (295,439)
Interest and other income 40,692 13,113 76,035 53,371
---------- ---------- ---------- ----------
Income (loss) before provision for
income taxes 243,707 (214,728) 1,497,978 (242,068)

Income tax (expense) benefit (88,635) 68,710 (555,019) 77,459
---------- ---------- ---------- ----------
Net income (loss) $ 155,072 $ (146,018) $ 942,959 $ (164,609)
========== ========== ========== ==========
Basic and diluted income (loss) per
common share $ .03 $ (.03) $ .20 $ (.04)
========== ========== ========== ==========
Weighted average shares outstanding
- basic 4,812,866 4,693,015 4,761,415 4,677,195
========== ========== ========== ==========
Weighted average shares outstanding
- diluted 4,832,779 4,693,015 4,800,618 4,677,195
========== ========== ========== ==========

See Notes to Consolidated Financial Statements

ORALABS HOLDING CORP AND SUBSIDIARIES

Consolidated Statement of Stockholders' Equity
Nine Months Ended September 30, 2006
Unaudited

Additional
Common Paid-In Retained
Shares Amount Capital Earnings Total
------------------------------------------------------------------

Balance at December 31, 2005 4,693,015 $4,693 $1,511,820 $5,030,266 $6,546,779

Stock options exercised 155,250 155 327,026 327,181

Tax benefit on exercise
of stock options (Note 2) 155,320 155,320

Stock-based compensation expense 13,975 13,975

Net income 942,959 942,959

------------------------------------------------------------------
Balance at September 30, 2006 4,848,265 $4,848 $2,008,141 $5,973,225 $7,986,214
==================================================================

See Notes to Consolidated Financial Statements

ORALABS HOLDING CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2006 and 2005
Unaudited

2006 2005
---- ----

Cash flows from operating activities:

Net income (loss) $ 942,959 $ (164,609)
----------------- -----------------
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation 409,134 420,049
Allowance for (recovery of) doubtful accounts 12,689 (133,438)
Deferred income taxes 268,488 (31,830)
Stock-based compensation expense 13,975

Changes in assets and liabilities:
Accounts receivable - trade (650,904) 61,048
Inventories (842,434) (305,263)
Prepaid expenses, deposits and other assets (160,439) 244,608
Accounts payable - trade (120,033) (43,477)
Deferred revenue (541,152)
Accrued liabilities 175,350 130,081
Reserve for returns (48,000) (112,439)
Income taxes payable/receivable 66,211 329,648

----------------- -----------------
(1,417,115) 558,987
----------------- -----------------
Net cash (used in) provided by operating activities (474,156) 394,378
----------------- -----------------
Cash flows from investing activities:

Investment in property and equipment (633,622) (569,569)
----------------- -----------------
Net cash used in investing activities (633,622) (569,569)
----------------- -----------------
Cash flows from financing activities:

Payment of long term debt (4,725) (8,869)
Stock options exercised 327,181 48,800
Tax benefit on exercise of stock options (Note 2) 155,320
----------------- -----------------
Net cash provided by financing activities 477,776 39,931
----------------- -----------------

Net decrease in cash and cash equivalents (630,002) (135,260)
Cash and cash equivalents, beginning of the period 1,834,144 866,432
----------------- -----------------
Cash and cash equivalents, end of the period $ 1,204,142 $ 731,172
================= =================

Cash paid for income taxes $ 65,000
=================

See Notes to Consolidated Financial Statements

ORALABS HOLDING CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. This report should, therefore, be read in
conjunction with the Annual Report on Form 10-KSB for the year ended December
31, 2005 (the "2005 Form 10-KSB") of OraLabs Holding Corp. and Subsidiaries (the
"Company").

The information included in this report is unaudited but reflects all
adjustments which, in the opinion of management, are necessary to a fair
statement of the results of the interim periods covered thereby. All adjustments
are of a normal and recurring nature except as described herein.

NOTE 2 - RECENT ACCOUNTING PROUNCEMENTS

In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004),
"Share-Based Payment" ("SFAS 123R"), which is a revision of SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS 123R supersedes APB Opinion No.
25, "Accounting for Stock Issued to Employees" and amends SFAS No. 95,
"Statement of Cash Flows". SFAS 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions and requires all share-based payments to employees, including
grants of employee stock options, to be recognized as additional compensation
expense in the financial statements based on the calculated fair value of the
awards. SFAS 123R also requires the benefits of tax deductions in excess of
recognized compensation costs to be reported as a financing cash flow. This
excess amount was $155,320 for the nine months ended September 30, 2006 and is
shown as "Tax benefit on exercise of stock options" in the Statement of Cash
Flows. We adopted this statement effective for our fiscal year beginning January
1, 2006. We have described the impact of adopting SFAS 123R in Note 6 to the
consolidated financial statements.

In March, 2005, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 107 regarding the Staff's interpretation of SFAS
No. 123(R). This interpretation provides the Staff's views regarding
interactions between SFAS No. 123(R) and certain SEC rules and regulatons and
provides interpretations of the valuation of share-based payments for public
companies. The interpretive guidance is intended to assist companies in applying
the provisions of SFAS No. 123(R) and investors and users of the financial
statements in analyzing the information provided. The Company followed the
guidance prescribed in SAB No. 107 in connection with its adoption of SFAS No.
123(R).

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections", which changes the requirements for the accounting and reporting of
a change in accounting principle and applies to all voluntary changes in
accounting principles. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed. APB No. 20
"Accounting Changes" required that most voluntary changes in accounting
principle be recognized by including in net income of the period of the change
the cumulative effect of changing to the new accounting principles. This
statement requires retrospective application to prior period financial
statements of changes in accounting principles, unless it is impracticable to
determine either the period-specific effects of the cumulative effect of the
change. The provisions of SFAS No. 154 are effective for fiscal years beginning
after December 15, 2005. The adoption of SFAS No. 154 by the Company did not
have an impact on its consolidated financial statements.

In July 2006, the FASB issued Interpretation No. 48 ("FIN 48"), "Accounting for
Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109". This
interpretation clarifies the accounting for uncertainty in income taxes
recognized in an entity's financial statements in accordance with SFAS No. 109,
"Accounting for Income Taxes". FIN 48 prescribes a recognition threshold and
measurement principles for financial statement disclosure of tax positions taken
or expected to be taken on a tax return. This interpretation is effective for
fiscal years beginning after December 15, 2006. The Company is currently
assessing the impact the adoption of FIN 48 will have on its consolidated
financial statements.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles and expands disclosures about fair
value measurements. This statement applies under other accounting pronouncements
that require or permit fair value measurements. SFAS No. 157 is effective for
fiscal years beginning after November 15, 2007. The Company is currently
assessing the impact the adoption of SFAS No. 157 will have on its consolidated
financial statements.

In September 2006, the SEC issued SAB No. 108 in order to eliminate the
diversity of practice surrounding how public companies quantify financial
statement misstatements. In SAB 108, the SEC staff established an approach that
requires quantification of financial statement misstatements based on the
effects of the misstatements on each of the company's financial statements and
related financial statement disclosures. SAB 108 is effective for fiscal years
ending after November 15, 2006. The Company is currently assessing the impact
the adoption of SAB No. 108 will have on its consolidated financial statements.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30, 2006:

Machinery and equipment $ 4,021,495
Construction in progress 504,629
Leasehold improvements 160,025
------------
4,686,149
Less accumulated depreciation (2,602,907)
------------
$ 2,083,242
============

NOTE 4 - LINE-OF-CREDIT

The Company has a $2,000,000 line-of-credit agreement with a bank secured
by substantially all of the Company's assets. The line of credit expires in
September 2008. As of September 30, 2006, the Company had no outstanding balance
on this line-of-credit.

NOTE 5 - RESERVE FOR RETURNS AND ALLOWANCES

The reserve for returns and allowances is calculated as a percentage of
sales with a consideration of historical returns. The reserve was decreased in
2005 following an evaluation of historical returns as well as an analysis of
current outstanding accounts receivable and future return estimates. The rate of
returns decreased during 2005 and through the first nine months of 2006.

NOTE 6 - STOCK-BASED COMPENSATION

The Company has two stock option plans, the 1997 Stock Option Plan (the
"1997 Plan"), and the 1997 Non-Employee Directors' Option Plan (the "1997
Directors' Plan"), (collectively, the "Plans"). Under the 1997 Plan, grants of
incentive stock options are permitted. Incentive stock options may only be
granted to employees of the Company, including officers and directors who are
also employees. Under the 1997 Directors' Plan, non-qualified options may be
issued to directors of the Company. The exercise price of incentive stock
options granted under the 1997 Plan must be at least 100% of the fair market
value of the Company's stock at the grant date. The exercise price of
non-qualified options is at the fair market value of the Company's stock at the
grant date. Aggregate common shares of 250,000 are reserved for issuance under
the 1997 Plan. Shares forfeited can be reissued under the 1997 Plan. Options
issued under the 1997 Plan vest over five years and expire ten years from the
date of grant. Options issued under the 1997 Directors' Plan vest over four
years and expire five years from the date of grant.

Effective January 1, 2006, the Company adopted SFAS 123R, using the
modified prospective method. SFAS 123R requires the recognition of the cost of
employee services received in exchange for an award of equity instruments in the
financial statements and is measured based on the grant date fair value of the
award. SFAS 123R also requires the stock option compensation expense to be
recognized over the period during which an employee is required to provide
service in exchange for the award (the vesting period). Prior to adopting SFAS
123R, the Company accounted for its stock-based compensation plans under
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees" ("APB 25"). Under APB 25, generally no compensation expense is
recorded when the terms of the award are fixed and the exercise price of the
employee stock option equals or exceeds the fair value of the underlying stock
on the date of grant. The Company adopted the disclosure-only provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").

For the nine months ended September 30, 2006, the Company calculated
compensation expense of $13,975 related to stock options.

For options granted subsequent to the adoption date of SFAS 123R on January
1, 2006, the fair value of each stock option grant is estimated on the date of
grant using the Black-Scholes option pricing model. The Company had no stock
option grants during the nine months ended September 30, 2006 and granted 50,500
stock options during the nine months ended September 30, 2005. The weighted
average fair value of stock options at the date of grant during the nine months
ended September 30, 2005 was $1.52 per option.

The expected life of stock options represents the period of time that the
stock options granted are expected to be outstanding based on historical
exercise trends. The expected volatility is based on the historical price
volatility of the Company's common stock. The risk-free interest rate represents
the U.S. Treasury bill rate for the expected life of the related stock options.
The dividend yield represents the Company's anticipated cash dividend over the
expected life of the stock options.

The following are the weighted-average assumptions used for options granted
during the nine months ended September 30, 2005:

Approximate risk free rate 3.74%
Average expected life 5 years
Dividend yield 0%
Volatility 78%

A summary of stock option activity for the nine months ended September 30,
2006 is presented below:

Weighed
Weighted Average
Shares Average Remaining Aggregate
Under Exercise Contractual Intrinsic
Option Price Life Value
----------- ----------- ----------- -----------

Outstanding at January 1, 2006 169,000 $ 2.21
Exercised (155,250) 2.11
Forfeited (6,250) 1.75
Expired (7,500) 4.75
-----------
Outstanding at September 30, 2006 --
===========
Exercisable at September 30, 2006 --
===========

A summary of the status of the Company's non-vested stock options as of and
for the nine months ended September 30, 2006 is presented below:

Non-vested Weighted
Shares Average
Under Grant Date
Option Fair Value
------------ ------------
Non-vested at January 1, 2006 18,750 $ 1.67

Vested (12,500) 1.67

Forfeited (6,250) 1.67
------------

Non-vested at September 30, 2006 --
============

During the quarter ended September 30, 2006, the board of directors
authorized the Company to accelerate the vesting of all remaining non-vested
stock options. As a result, during the quarter ended September 30, 2006, all
remaining compensation cost related to stock options was recognized.

Prior to January 1, 2006, the Company determined the value of stock-based
compensation arrangements under the provisions of APB 25 and made pro forma
disclosures required under SFAS No. 123. SFAS No. 123 permitted the use of
either a fair value based method or the method defined in APB No. 25 which
required the disclosure of pro forma net income (loss) and earnings per share
that would have resulted from the use of the fair value based method. Had
compensation expense for stock option grants been determined based on the fair
value at the grant dates consistent with the method prescribed in FASB 123, the
Company's net loss and net loss per share would have been adjusted to the pro
forma amounts below for the three- month and nine-months ended September 30,
2005, as indicated below:

Three months ended Nine months ended
9/30/05 9/30/05
---------- -----------

Net loss, as reported $ (146,018) $ (164,609)
Total stock-based employee compensation
expense determined under fair market value
method for an award -- (98,931)
---------- -----------
Net loss available to common shareholders-
pro forma $ (146,018) $ (263,540)
========== ===========
Basic and diluted loss per common share-
as reported $ (.03) $ (.04)
Basic and diluted loss per common share-
pro forma $ (.03) $ (.06)

NOTE 7 - CUSTOMER CONCENTRATIONS

The Company's revenues are generated from customers located in the United
States. The following table summarizes sales to individual customers that
comprised more than 10% of the Company's sales for the periods ended September
30.

3 months ended 9 months ended
--------------- --------------
Customer 9/30/06 9/30/05 9/30/06 9/30/05
-------- ------- ------- ------- -------

A 29% 6% 16% 12%
B 4% 16% 6% 16%
C - - 10% -

As of September 30, 2006, two customers comprised approximately 45% and
10%, respectively of the Company's accounts receivable. As of September 30, 2005
one customer comprised approximately 10% of the Company's accounts receivable.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

RELATED PARTY OPERATING LEASES

The Company leases office and manufacturing facilities under an operating
lease for property controlled by the Company's President, which expires in
September 2009. Rent expense recorded during both the three and nine months
ended September 30, 2006 and 2005 was $111,522 and $334,566, respectively, under
this related party lease.

OTHER

The Company has one operating lease for a vehicle, which expires in June
2010. Payments under this lease are $723 per month.

LITIGATION

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse impact either
individually or in the aggregate on consolidated results of operations,
financial position or cash flows of the Company.

DEPOSITS

At September 30, 2006 the Company had deposits of $417,907 for orders of
production materials.

NOTE 9 - STOCK EXCHANGE AGREEMENT

The Company entered into a Stock Exchange Agreement (the "Agreement") dated
as of March 31, 2006, as amended on July 20, 2006, and October 12, 2006 with
Partner Success Holdings Limited ("PSHL") under which all of the issued and
outstanding shares of PSHL are to be acquired by the Company in consideration
for the issuance to the owners of PSHL of common stock representing a 94%
ownership interest in the Company, after giving effect to a redemption by the
Company of 3,629,350 shares of its outstanding common stock owned individually
by its President, Gary H. Schlatter. The redemption is to be in consideration
for the transfer to Mr. Schlatter of all of the Company's outstanding common
stock of its wholly-owned operating subsidiary, OraLabs, Inc. The 94% ownership
interest in the Company is to be determined on a fully-diluted basis that will
take into account the issuance of 300,000 shares to the non-employee directors
of the Company prior to closing and after receiving shareholder approval, and
all options that were available to be exercised by employees prior to the
closing (all employee options have been exercised). The Agreement also provides
that the domicile of the Company will be changed from Colorado to Delaware and
the number of authorized shares of the Company will be increased to 62,000,000.
OraLabs, Inc. will pay certain tax liabilities arising out of closing the
transactions and will fund all or a part of the payment by purchasing up to
100,000 shares of the Company. If the closing of the Agreement occurs, PSHL will
become a wholly-owned subsidiary of the Company. Either party may terminate the
Agreement if the closing does not occur by January 15, 2007. The closing of the
Agreement is conditioned upon, among other things, customary closing conditions,
including the satisfaction of both the Company and PSHL with their due diligence
investigations of the other party and the receipt by the Board of Directors of
the Company of a fairness opinion. There can be no assurance that closing of the
transactions described in the Agreement will occur.

ORALABS HOLDING CORP AND SUBSIDIARIES

ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations

Special Note on Forward-Looking Statements

Section 21E of the Securities Exchange Act of 1934, as amended, and Section
27A of the Securities Act of 1933, as amended, provide a safe harbor for certain
forward-looking statements. This quarterly report contains statements that are
forward-looking. Forward looking statements include those which are not
historical facts, including without limitation statements about management's
expectations for any period beyond the fiscal quarter ended September 30, 2006.
Words such as "expect", "anticipate", "believe", "intend" and "estimate" and
similar expressions are examples of words which identify forward looking
statements. While these statements reflect the Company's beliefs as of the date
of this report, they are subject to assumptions, uncertainties and risks that
could cause actual results to differ materially and adversely from the results
contemplated, forecasted or estimated in the forward-looking statements included
in this report. These factors include, but are not necessarily limited to, the
impact of competitive products, the acceptance of new products or product lines
in the marketplace, the Company's ability to manage growth, the availability of
an adequate work force, and changes in market conditions.

Results of Operations. For the three month period ended September 30, 2006
as compared with the three month period ended September 30, 2005.

Product sales increased $1,441,116 or 49%. This increase in revenue was
primarily a result of an increase in sales due to increased customer demand
during the third quarter of 2006. The Company received increased orders on its
breath freshening products as well as new customers for its new and core
products in the third quarter of 2006. The Company believes that it can supply
any orders that it would reasonably expect to receive during the fourth quarter
of 2006. The Company cannot be sure that any increased level of sales will
occur.

Gross profit increased $535,290. As a percentage of sales, gross profit
increased approximately 1%. A greater concentration of sales were to higher
margin customers resulting in a slightly increased gross profit margin. The
Company's capital investment in automation continues, as it did in 2005, to make
a positive impact on labor costs. The Company expects to continue with this type
of capital investment.

Engineering costs increased by $31,577 due to an increase in labor costs to
maintain and repair manufacturing equipment.

Selling and marketing increased by $29,317 due to an increase in sales
commissions and advertising. These expenses are expected to remain at the same
increased level through the remainder of 2006.

General and administrative expenses increased $42,904. Salaries increased
in the third quarter of 2006 by $39,340. Legal fees and insurance costs also
increased slightly from the previous period.

The Company had net income of $155,072 in the third quarter of 2006
compared to a net loss of $146,018 in the third quarter of 2005 as explained by
the above activities.

The effective tax rate increased from 32% to 36% for the quarter ended
September 30, 2006 compared to the quarter ended September 30, 2005. The
Company's remaining net operating loss carry forwards have been fully offset
with taxable income, resulting in income taxes payable totaling $66,211 as of
September 30, 2006. Taxable income in the future, if any, will result in income
taxes payable.

Results of Operations. For the nine month period ending September 30, 2006
as compared with the nine month period ending September 30, 2005.

Product sales increased $4,235,946 or 47%. This increase in revenue was
primarily a result of an increase in sales due to increased customer demand. The
Company received increased orders on its breath freshening products as well as
new customers for its new and core products. The Company believes that the
fourth quarter will bring a higher level of sales compared to third quarter due
to the seasonality of our primary product line. The Company believes that it is
now in a position to fill a higher level of orders, should they occur. The
Company cannot be sure that any increased level of sales will occur.

Gross profit increased $2,194,734. As a percentage of sales, gross profit
increased approximately 4%. A greater concentration of sales were to higher
margin customers, thereby reducing the cost of materials as a percentage of
sales. The increase in gross profit is also, but to a lesser extent, due to
decreased costs of labor and overhead and materials, as a percentage of sales.
The Company's capital investment in automation made a positive impact on labor
costs during 2006. The Company anticipates continued investment in capital
equipment.

Engineering expenses decreased $22,368 due to a decrease in labor costs to
maintain and repair manufacturing equipment.

Selling and marketing expenses increased $237,348 due to an increase in
salaries, commissions, and advertising. These costs should remain stable through
the end of the year.

General and administrative expenses increased $257,585 due to an increase
in salaries, legal fees, accounting fees, and insurance. The Company expects an
increase in legal fees related to corporate reorganization transactions in the
last three months of 2006, as compared to the first nine months, but other
administrative expenses should remain consistent.

Other expense increased $4,787, remaining stable from 2005 to 2006. Other
expenses are expected to remain stable going forward.

The Company had net income of $942,959 in the first nine months of 2006
compared to a net loss of $164,609 for the same period in 2005. The effective
tax rate for the first nine months of 2005 was 32%, while the rate for the first
nine months of 2006 was 37%, consistent with management's expectations.

Liquidity and Capital Resources. Balance Sheet as of September 30, 2006
compared to December 31, 2005.

At September 30, 2006, the Company had $1,204,142 of cash and its current
ratio was 4.6 to 1. The Company believes its current capital resources are
sufficient to fund operations for the next twelve months.

Net cash used in operating activities during the nine months ended
September 30, 2006 in the amount of $474,156 consists of the following:

Accounts receivable, net of allowance for doubtful accounts, increased
$638,215. While A/R increased by $650,904, the allowance for doubtful accounts
increased by $12,689. The increase in accounts receivable is the result of
additional sales to a single customer. The Company collected past due
receivables by over $200,000 from December 31, 2005 to September 30, 2006 and is
working towards comprehensive customer account reconciliations to reduce the
amount of allowances against open past due balances.

Inventory increased $842,434, due to an increase in anticipated sales.
Inventory is anticipated to continue to reflect anticipated sales. Prepaid
expenses and deposits increased $160,439 due primarily to more deposits made for
orders of production materials, and an increase in insurance premiums.

Accounts payable decreased $120,033 due to timing of payments.

Accrued liabilities increased $175,350 due to accruals for sales
commission, payroll, and workman's compensation.

Reserve for returns decreased $48,000 due to an expected decrease in
returns based on historical trends of actual returns. It is anticipated that the
reserve for returns will remain stable going forward.

Deferred revenue decreased $541,152 due to first quarter sales that had
been recorded as deferred revenue in the fourth quarter of 2005. Income taxes
payable increased $66,211. The Company's remaining net operating loss carry
forwards were fully offset with taxable income during the nine months ended
September 30, 2006. As a result, future taxable income, if any, will result in
income taxes payable.

Cash from investing activities:

Investment in property and equipment was $633,622. This is comprised of
various automation projects designed to reduce production labor costs and
increase capacity. Equipment additions are also planned for the fourth quarter
of 2006.

Cash flows from financing activities:

Long-term debt decreased $4,725 due to payments made on the vehicle note.

Stock options were exercised in the second and third quarters resulting in
cash received of $327,181.

A benefit of $155,320 for tax deductions in excess of recognized
compensation costs was recorded during the nine-months ended September 30, 2006,
which will result in less taxes owed by the Company.

Trends. Revenues from sales of lip balm, the Company's major product line,
were $9,121,791 in the first 9 months of 2006 compared to $7,229,202 for the
same period in 2005, or a 26% increase. As stated above in results of
operations, this increase in revenue was primarily a result of increased demand.
The Company believes that the fourth quarter of the year will bring increased
sales, as it has historically. However, the Company cannot be sure that any
increased level of sales will occur. The Company trimmed its product line where
appropriate and added new items and the Company believes it will generate
increased sales. However, there can be no assurances of this.

Sales of sour drops and breath fresheners in the first 9 months of 2006
were $2,880,234 compared to $1,344,968 for the same period in 2005, or a 114%
increase. The Company continues to maintain a solid base of customers. The
increase from 2005 to 2006 is attributed to the addition of new breath
freshening products. The Company anticipates growth in the fourth quarter 2006
and beyond.

Sales of sterile products, $497,760 in the first 9 months of 2006,
represented 4% of the overall revenue. Sales dropped off in the third quarter.
The Company is planning to phase out this product line. The Company is
researching alternative uses of equipment allocated to these products.

The nutritional supplements provided revenues of $69,022. Revenues were
down $153,992 in the first nine months of 2006 compared to 2005, or a 69%
decrease. The Company is in the process of discontinuing this product line.

Sales of hand sanitizers were $735,655 in the first 9 months of 2006. The
sales in first 9 months of 2005 were not material to the Company's overall sales
and therefore were not broken out as a separate group. The Company anticipates a
continued steady increase in sales of hand sanitizers in 2006.

Impact of fuel increases. The Company has seen a continued increase in its
cost of plastic components and an increase in fuel surcharges by freight
companies. If these trends continue, which the Company expects, the Company
could see future erosion on margins.

Impact of Inflation. The Company's financial condition has been affected by
the recent modest inflation. However, it is not certain to what extent. The
Company has been receiving many raw material price increases. At this time the
Company does not believe that revenues will be materially affected by inflation.
The Company's lip care and oral care products are primarily very low retail
price points and impulse items.

Seasonality. The demand for the Company's lip balm products tends to
increase during the cold, dry weather months, but the inclusion of sun block in
some of the lip balm products may help to offset some of the seasonality. Even
though the sun block products help, sales of lip balm are still considered to be
50-70% seasonal.

The following table shows aggregated information about contractual
obligations as of September 30, 2006:

Payments Due by Period
-------------------------------------------------------------------------------------------
Total Less Than 1 Year 1-3 Years 4-5 Years After 5 Years
--------------------------------------------------------------------------------------------------------------------

Long-Term Debt $8,400 $6,300 $2,100

Building Lease $1,373,942 $446,085 $927,857

Vehicle $32,535 $8,676 $23,859

--------------------------------------------------------------------------------------------------------------------
Total $1,414,877 $461,061 $953,816

====================================================================================================================

Recent Accounting Pronouncements

ITEM 3. CONTROLS AND PROCEDURES

Control deficiencies were identified by management in 2004 in consultation with
EKS&H, the Company's previous independent auditors. EKS&H advised the Company of
a material weakness relating to controls over the inventory process and
reportable conditions relating to financial reporting and lack of oversight in
the accounting process. The Company implemented new software at the end of 2004
along with training staff on the Company's new systems. However, the perpetual
inventory contained costing and lot tracking errors with the data conversion
from the previously used software, which could not be immediately corrected and
caused problems with processing of raw material usage and manufactured items. As
the Company worked through the associated processing issues, quarterly physical
inventories were performed. The physical inventories were internally audited for
costing in detail to assure an accurate representation of inventory and the
related cost of materials in 2005. The Company's investment in a widely used,
mid-sized business accounting and inventory system along with retention and
ongoing training of its accounting staff has successfully minimized processing
and control deficiencies. The CEO and CFO have been and remain actively involved
in the daily operations of the business and analyze financial data on a daily
basis.

Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer and its Chief Financial Officer, after evaluating the
effectiveness of the Company's disclosure controls and procedures (as defined in
the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c) as of the last
day of the period of the accompanying financial statements (the "Evaluation
Date")), have concluded that as of the Evaluation Date, the Company's disclosure
controls and procedures were adequate and effective to ensure that material
information relating to the Company and its consolidated subsidiaries would be
made known to them by others within those entities, particularly during the
period in which this quarterly report on Form 10-QSB was being prepared.

Our external auditors have not issued an attestation report on management's
assessment of the Company's internal control over financial reporting, as it is
not required for the Company at this time.

PART II - OTHER INFORMATION

Item No. 1. Legal Proceedings.

The Company is not a party to any material pending legal proceedings, and
to the best of its knowledge, no such proceedings by or against the Company have
been threatened.

Item No. 2. Changes in Securities. None.

Item No. 3. Defaults Upon Senior Securities. None.

Item No. 4. Submission of Matters to a Vote of Security Holders. None.

Item No. 5. Other Information.

Effective August 31, 2006, OraLabs, Inc. extended its lease for its
facilities for three years, terminating September 30, 2009.

Item No. 6. Exhibits and Reports on Form 8-K.

(a) Exhibits required to be filed are listed below: Certain of the
following exhibits are hereby incorporated by reference pursuant to Rule
12(b)-32 as promulgated under the Securities and Exchange Act of 1934, as
amended, from the reports noted below:

Exhibit
No. Description
--- -----------

3.1(i)(1) Articles of Incorporation

3.1(ii)(2) Amended and Restated Bylaws

3.1(ii)(3) Second Amended and Restated Bylaws

4(2) Specimen Certificate for Common Stock

10.1(2) 1997 Stock Plan

10.2(2) 1997 Non-Employee Directors' Option Plan

10.4(2) Stock Option Grant under 1997 Non-Employee Directors'
Option Plan

10.5(iv)(4) Lease between the Company's Subsidiary and 18501 East
Plaza Drive, LLC dated September 4, 2003

10.5(v)(9) First Amendment to Lease between the Company's
Subsidiary and 18501 E. Plaza Drive, LLC dated
August 31, 2006

10.10(5) Amended and Restated Employment Agreement between the
Company's Subsidiary and Gary Schlatter dated May 1,
2003

10.11(6) Agreement as of May 1, 2006, extending Amended and
Restated Employment Agreement between the Company's
Subsidiary and Gary Schlatter

10.12(7) Stock Exchange Agreement between the Company and
Partner Success Holdings Limited as of March 31, 2006

10.13(8) First Amendment to Stock Exchange Agreement (exhibit
10.12 above) dated July 20, 2006

11 No statement re: computation of per share earnings is
required since such earnings computation can be
clearly determined from the material contained in this
Quarterly Report on Form 10-QSB.

21(2) List of Subsidiaries of the Company

31.1(9) Certification Pursuant To 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 302 Of The Sarbanes-Oxley
Act Of 2002

31.2(9) Certification Pursuant To 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 302 Of The Sarbanes-Oxley
Act Of 2002

32.1(9) Certification Pursuant To 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley
Act Of 2002

32.2(9) Certification Pursuant To 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley
Act Of 2002

1 Incorporated herein by reference to Exhibit C of the Definitive Information
Statement filed by the Company's predecessor, SSI Capital Corp., on July
24, 1997.

2 Incorporated herein by reference to the Company's Form 10-K filed for
fiscal year 1997.

3 Incorporated herein by reference to the Company's Form 10-KSB filed for
fiscal year 1998.

4 Incorporated herein by reference to the Company's Form 10-QSB filed for the
quarter ended September 30, 2003.

5 Incorporated herein by reference to the Company's Form 10-QSB filed for the
quarter ended June 30, 2003.

6 Incorporated herein by reference to the Company's Form 10-QSB filed for the
quarter ended June 30, 2006.

7 Incorporated herein by reference to the Company's Form 8-K filed April 6,
2006.

8 Incorporated by reference to the Company's Form 8-K filed July 25, 2006.

9 Filed herewith.

(b) Reports on Form 8-K were filed by the Company on July 25, 2006
concerning Item 1.01 with respect to a First Amendment to Stock
Exchange Agreement, on August 22, 2006 concerning Item 8.01(Other
Events) with respect to the filing by the Company on August 21, 2006
of its Preliminary Proxy Statement, and on October 17, 2006 concerning
Item 1.01 with respect to a Second Amendment to Stock Exchange
Agreement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

ORALABS HOLDING CORP.

By: /s/ Gary H. Schlatter
---------------------
Gary H. Schlatter, President

By: /s/ Emile J. Jordan
-------------------
Emile J. Jordan, Chief Financial Officer

Dated: November 7, 2006

Exhibit Index

Exhibit
No. Description
--------- ------------
10.5(v) First Amendment to Lease between the Company's
Subsidiary and 18501 E. Plaza Drive, LLC dated
August 31, 2006

31.1 Certification of President Pursuant To 18 U.S.C.
Section 1350, As Adopted Pursuant To Section 302
Of The Sarbanes-Oxley Act Of 2002

31.2 Certification of Chief Financial Officer
Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 302 Of The Sarbanes-Oxley
Act Of 2002

32.1 Certification of President pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

32.2 Certification of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002