Obscene Jeans: $20 Million Worth of Nothing
This self-proclaimed fashion leader has been heavily promoted, or rather, the stock has been promoted, in advertisements all over the Net. It's run by a guy who seems to be in love with his own image. Naturally, this "sexy vegetarian" self-promoter, who was last seen running what looks like a personal training service in Texas, is a born fashion mogul.
Obscene Jeans (OTCQB:OBJE) visionary Robert Federowicz is a man of many subtle charms. He’s a successful business executive, maintaining close contacts on both sides of the Atlantic. He’s multi-lingual, which comes in handy making new friends in the party capitals of Europe. And perhaps most impressively, the striking CEO knows how to rock a pair of jeans.
Here's the best part of that. Looks like dude wrote it himself (see PR here) but pretends (by creating a fake link to the Miami Herald on his web site) that this came from a story on him and the company.
What is Obscene jeans? To me, nothing but a pipe dream run by a guy who used to run a gym in Texas. To Robert F., it's a company that has worldwide appeal. The web site shows a cheesey banner animation that talks about Barcelona, Monaco, and other exotic locales, as if Obscene Jeans is the next big thing there. I was just in Monaco. I didn't see any Obscene Jeans there. Wondering why?
It's not the next big thing anywhere. It doesn't even have product. It can't pay its bills. It's nothing but a plan in need of funding (or what I call, dumb money) and it's trading at a $20 million market cap. The only thing it currently produces is a slew of press releases touting nonsense business plans.
So, if the whole premium denim wanna-be thing doesn't excite you enough, in June, they decided they would be a player in Chinese beauty products. (For the low, low price of $25,000...) Monday, they tried a Mr. Subliminal (cough... lululemon... cough) trick by touting an option to maybe, you know, sorta maybe, buy what looks to me like a nonsense yogawear outfit. (This one?) This one? Are they the same? Who knows. Have some fun either way. Click the "collection" link here, and prepare to be underwhelmed.
But don't take my word for it that this is a horrow show destined to behead any retail investor naive enough to buy the pitch: Read the filings, which I've exerpted below. And keep this in mind. Companies like this, who admit they're about to run out of cash, either need to borrow, issue equity, or both. Often, they can't do this without getting rubes interested in the stock (so any equity buyers via a PIPE, or convertible holders will later have a liquid pool on which to dump their junk.)
For the nine months ended May 31, 2011, the Company had a net loss of $340,713 and negative cash flow from operations of $253,833. As of May 31, 2011, the Company has negative working capital of $249,785. The Company has not emerged from the development stage.
These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
Obscene Jeans Corp.
(A Development Stage Corporation)
Notes to Unaudited Financial Statements
The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to continue to focus on raising the funds necessary to fully implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.
In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to ultimately achieve adequate profitability and cash flows from operations to sustain its operations.
4. Related Party Transactions
In September 2009, the Company sold 9,000,000 shares of common stock to Rachel Stark-Cappelli, its founder and sole director, for $0.001 per share. On December 19, 2010, Ms. Stark-Cappelli sold the 9,000,000 shares of common stock to Kern Capital Corp, a Marshall Islands Corporation.
The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.
5. Change in Management
On December 14, 2010, Ms. Stark-Cappelli resigned from all positions held with the Company, including resigning from Board service. There was no disagreement between the Company and Ms. Stark-Cappelli at the time of her resignation from the Board of Directors. Ms. Stark-Capelli is currently the Director of Operations for the Company.
Also on December 14, 2010, the Company appointed Robert Federowicz as Director, CEO and President to replace Ms. Stark-Cappelli. Mr. Federowicz will serve as a director until his successor has been elected at the next annual meeting of the Company's shareholders or until his earlier resignation, removal, or death, and Mr. Federowicz has not been appointed to any committees of the Board as the Board does not presently have any committees.
Mr. Federowicz does not have any employment agreement or other compensatory agreement in place with the Company. He is being paid $10,000 per month for his services to the Company.
6. Advances from Third Parties
During the nine months ended May 31, 2011, the Company received net, non-interest bearing advances from certain third parties totaling $292,188. The total amount due under these advances as of May 31, 2011 was $292,188. These advances are not collateralized and are due on demand. Interest was not imputed on these advances due to immateriality.
Obscene Jeans Corp.
(A Development Stage Corporation)
Notes to Unaudited Financial Statements
7. Common Stock
On December 20, 2010, the Company issued 1,000,000 shares of common stock to Kern Capital Corp. for services. The shares were valued at $50,000 based on the value of the services received. There was no readily determinable market value for the shares, as they were not traded on any exchanges during that time period.
8. Recently Issued Accounting Pronouncements
In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”). Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration. Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors. The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.
Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements.
9. Subsequent Event – Acquisition of Beijing Beautyfresh International Trade Company
On April 26, 2011, the Company signed a Global Strategic Profit Alliance Agreement (the “Alliance Agreement”) with Beijing Beautyfresh International Trade Company, a company registered and operated under the laws of the People’s Republic of China (“Beautyfresh”). Under the terms of the Alliance Agreement, the Company would fund Beautyfresh’s efforts to import, market and distribute all Obscene Jeans-branded products throughout mainland China and export and market beauty products in Greece. In exchange, the Company would receive a percentage of Beautyfresh’s net profits as will be set out in an operating agreement to be negotiated.
On June 14, 2011, the Company signed a Purchase Agreement (the “Purchase Agreement”) with Beautyfresh. Under the terms of the Purchase Agreement, the Company has agreed to purchase all assets of Beautyfresh for the purchase price of $25,000 cash. Beautyfresh is one of a limited number of import/export entities authorized by the Chinese government to service and distribute foreign products within the emerging Chinese marketplace, giving OBJE not only an existing brand of luxury products but all of the necessary infrastructure to capitalize on the exploding Chinese market for all-natural beauty supplies and cosmetics.
PART I — FINANCIAL INFORMATION
Management’s Discussion and Analysis of Financial Condition and Results of Operation
THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS “ANTICIPATED,” “BELIEVE,” “EXPECT,” “PLAN,” “INTEND,” “SEEK,” “ESTIMATE,” “PROJECT,” “WILL,” “COULD,” “MAY,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY’S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.
The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.
OVERVIEW OF THE COMPANY
We are a development-stage company, incorporated in the State of Florida on September 21, 2009, as a for-profit company, and an established fiscal year of August 31. We have not yet generated or realized any revenues from business operations. Our auditor has issued a going concern opinion. This means there is substantial doubt that we can continue as an on-going business for the next eighteen (18) months unless we obtain additional capital to pay our bills. Accordingly, we must raise cash from sources other than loans we undertake.
From inception through the ending date of the period covered by this Quarterly Report, May 31, 2011, our business operations have primarily been focused on implementing our business plan by designing collection sketches, and researching contractors, sales agents, distributors and website designers. We have spent a total of approximately $361,000 since inception on start-up costs (legal, accounting and administrative) and the initial stages of our business plan. Based upon this, we believe that we have never been a shell company as defined by the SEC’s Rule 144(i)(1). We have not generated any revenue from business operations.
In June 2011, OBJE went international, purchasing the Chinese luxury importer Beijing Beautyfresh International Trade Co. (“Beautyfresh”). One of a limited number of import/export entities authorized by the Chinese government to service and distribute foreign products within the emerging Chinese marketplace, Beautyfresh is a key acquisition in OBJE’s global growth strategy. After opening this door to the massive Chinese luxury market, the company expanded its business focus to include Beautyfresh’s line of luxury beauty products, establishing the Obscene Beauty brand. In June 2011, OBJE signed an option to sell all-natural SEBA brand hair care products as part of the new brand.
As of May 31, 2011, we had $80,116 cash on hand. We believe that this cash will satisfy our operating requirements for approximately one month.
Plan of Operations
We believe we do not have adequate funds to satisfy our working capital requirements for the next twelve months. We will need to raise additional capital to continue our operations. During the next 18 months, we intend to continue implementing our business and marketing plan. We believe we must raise an additional $500,000 to pay for expenses associated with our development over the next 18 months. Of this amount, $150,000 will be used to finance anticipated activities during Phase One of our development plan as described below, and $350,000 will be used to finance anticipated activities during Phase Two of our development plan as described below.