##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number:
    001-32563
  
  ORCHIDS PAPER PRODUCTS
    COMPANY
  A Delaware Corporation
    (State or other jurisdiction of
    incorporation or organization)

23-2956944
    (I.R.S. Employer
    Identification Number)   4826 Hunt Street
 Pryor, Oklahoma 74361
 (Address of principal executive offices)
  Registrants telephone number, including area code:
 (918) 825-0616
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, $0.001 Par Value

American Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
     Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company þ   Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


10Item 1B.


Unresolved Staff Comments


15Item 2.


Properties


15Item 3.


Legal Proceedings


15Item 4.


Submission of Matters to a Vote of Security
    Holders


16PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


16Item 6.


Selected Financial Data


18Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


19Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


32Item 8.


Financial Statements and Supplementary Data


33Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


49Item 9A.


Controls and Procedures


49Item 9B.


Other Information


49PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


50Item 11.


Executive Compensation


50Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


50Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


51Item 14.


Principal Accountant Fees and Services


51PART IVItem 15.


Exhibits and Financial Statement Schedules


51Signatures


53Subsidiaries of the CompanyConsent of Independent Registered Public Accounting FirmSection 302 CertificationSection 302 CertificationSection 906 Certification   2




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##### Table of Contents



PART I  Form 10-K
    Item 1.
    BUSINESS  Overview
    of Our Business
  900-mile ® ®
      start-up,
  History
      3-for-2
 3




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Our
    Competitive Strengths
  Focus on supplying value retailers.
  Proximity to key customers.
  Experienced management team and trained
    workforce.
  Low cost tissue manufacturers.
  Our
    Strategy
    
    increasing the efficiency of our operating assets;
    leveraging our existing customer relationships in the value
    retail channel; and
    selectively expanding our customer base in other retail channels.  Increasing the efficiency of our operating
    assets. start-up start-up
 4




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##### Table of Contents



Leveraging Our Existing Customer Relationships in the Value
    Retail Channel.
    Selectively Expanding Our Customer Base in Other Retail
    Channels.
  Competitive
    Conditions
    900-mile
    Product
    Overview
  ® ® ® ® ® ® ®
 5




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##### Table of Contents



Customers
      900-mile
      Dollar General.
  Family Dollar.
  Wal-Mart.
  Sales and
    Marketing Team
     6




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##### Table of Contents



Manufacturing
    three-day
  2007


2006


2005


2004


2003(Tons)Manufactured  Total


49,264



32,853



26,051



27,327



26,701Less Third Party Sales


(10,277
)


(1,191
)






(945
)


Purchased Parent Rolls


1,442



6,970



12,153



5,017



3,349Converted  Total


40,429



38,632



38,204



31,399



30,050   ramp-up start-up
    362-day-a-year
  Distribution
  drop-and-hook
 7




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Raw
    Materials and Energy
      Backlog
    Trademarks
    and Trade Names
  ® ® ® ® ® ® ®
  Employee
    and Labor Relations
   8




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##### Table of Contents



Environmental,
    Health and Safety Matters
          Executive Officers and Key Employees
    Name

Age

PositionRobert A. Snyder


59


Chief Executive Officer and President, DirectorKeith R. Schroeder


52


Chief Financial Officer   Robert
    A. Snyder, 59, Chief Executive Officer and President,
    Director
    Keith
    R. Schroeder, 52, Chief Financial Officer
   9




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##### Table of Contents



Available
    Information
  1-800-SEC-0330
  Item 1A.
    RISK
    FACTORS    Risks
    Related To Our Business
  We
    face intense competition and if we cannot successfully compete
    in the marketplace, our business, financial condition and
    operating results may be materially adversely
    affected.
      
    aggressive pricing by competitors, which may force us to
    decrease prices in order to maintain market share;
    our ability to improve plant efficiencies and operating rates
    and lower manufacturing costs;
    the availability, quality and cost of raw materials,
    particularly recycled waste paper and labor; and
    the cost of energy.    A
    substantial percentage of our converted product revenues are
    attributable to three large retail customers, which may decrease
    or cease purchases at any time.
   10




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##### Table of Contents



We
    have significant indebtedness which limits our free cash flow
    and subjects us to restrictive covenants relating to the
    operation of our business.
      The
    availability of and prices for energy will significantly impact
    our business.
  start-up
  Our
    exposure to variable interest rates may affect our financial
    health.
    We
    exclusively use preconsumer solid bleached sulfate paper, or SBS
    paper, to produce parent rolls and any disruption in our supply
    or increase in the cost of preconsumer SBS paper could disrupt
    our production and harm our ability to produce tissue at
    competitive prices.
   11




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start-up
    We
    depend on our management team to operate the Company and execute
    our business plan.
    Labor
    interruptions would adversely affect our business.
  and/or
  Our
    paper mill may experience shutdowns adversely affecting our
    financial position and results of operations.
     12




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Our
    operations require substantial capital, and we may not have
    adequate capital resources to provide for all of our cash
    requirements.
    Our
    business is subject to extensive governmental regulations and
    any imposition of new regulations or failure to comply with
    existing regulations could involve significant additional
    expense.
    If we
    fail to maintain an effective system of internal controls, we
    may not be able to accurately report our financial results or
    prevent fraud and, as a result, our business could be harmed and
    current and potential stockholders could lose confidence in us,
    which could cause our stock price to fall.
     13




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##### Table of Contents



Risks
    Related To Our Common Stock
  We do
    not pay cash dividends on our capital stock, and we do not
    anticipate paying any cash dividends in the
    future.
    Our
    certificate of incorporation and bylaws, and Delaware law
    contain provisions that could discourage a
    takeover.
    
    discourage, delay or prevent a change in the control of our
    company or a change in our management;
    adversely affect the voting power of holders of common
    stock; and
    limit the price that investors might be willing to pay in the
    future for shares of our common stock.  Our
    future operating results may be below securities analysts
    or investors expectations, which could cause our stock
    price to decline.
    
    our ability to reduce production costs;
    demand for our products; and
    our ability to develop sales and marketing capabilities.    Our
    common stock has low average trading volume, and we expect that
    the price of our common stock could fluctuate substantially,
    possibly resulting in class action securities
    litigation.
  3-for-2
  
    actual or anticipated variations in our results of operations or
    those of our competitors;
    changes in earnings estimates or recommendations by securities
    analysts or our failure to achieve analysts earnings
    estimates; and
    developments in our industry.   14




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##### Table of Contents



Our
    directors have limited personal liability and rights of
    indemnification from us for their actions as
    directors.
    
    any breach of their duty of loyalty to the corporation or its
    stockholders;
    acts or omissions not in good faith or which involve intentional
    misconduct or a knowing violation of law;
    unlawful payments of dividends or unlawful stock repurchases or
    redemptions; or
    any transaction from which the director derived an improper
    personal benefit.          Item 1B.
    UNRESOLVED
    STAFF COMMENTS    Item 2.
    PROPERTIES  36-acre
  AnnualFacility

Capacity


Sq. Ft.Paper making  three machines


21,000 tons



135,000Paper making  new machine


33,000 tons



27,000Converting


7,700,000 cases



300,000     Item 3.
    LEGAL
    PROCEEDINGS   15




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##### Table of Contents



Item 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  Item 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
  3-for-2
  High


LowYear Ended December 31, 2005:July 15, 2005 to September 30, 2005

$
6.97


$
5.67Fourth Quarter

$
7.03


$
6.43Year Ended December 31, 2006:First Quarter

$
9.31


$
6.70Second Quarter

$
10.53


$
9.00Third Quarter

$
11.36


$
8.99Fourth Quarter

$
9.34


$
8.20Year Ended December 31, 2007:First Quarter

$
8.65


$
6.67Second Quarter

$
7.08


$
5.01Third Quarter

$
8.78


$
5.25Fourth Quarter

$
9.85


$
7.25    16




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##### Table of Contents



Performance
    Graph
      
  July 15,


December 31,


December 31,


December 31,2005


2005


2006


2007Orchids Paper Products Company


$
100




120.59




150.53




160.59Peer Group


$
100




93.94




120.31




76.13S & P Small Cap


$
100




101.76




115.61




117.34S & P Composite 1500 Paper Products


$
100




115.11




117.95




119.29   Common
    Stock Dilution
     17




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##### Table of Contents



Dividends
    Recent
    Sales of Unregistered Securities
    Repurchase
    of Equity Securities
    Item 6.
    SELECTED
    FINANCIAL DATA  Form 10-K.
 18




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##### Table of Contents



Form 10-K.
  Successor


PredecessorTen-Months


Two-Months


Combined


PredecessorYear Ended


Year Ended


Year Ended


Ended


Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,


December 31,


February 29,


December 31,


December 31,2007


2006


2005


2004


2004


2004


2003(In thousands, except Tons and per Ton data)Net Sales

$
74,648


$
60,190


$
57,700


$
39,736


$
7,191


$
46,927


$
44,524Cost of Sales


63,717



53,988
(1)


50,385
(1)


33,873
(1)


6,253
(1)


40,126
(1)


37,215
(1)Gross Profit


10,931



6,202
(1)


7,315
(1)


5,863
(1)


938
(1)


6,801
(1)


7,309
(1)Selling, General and Administrative Expenses


5,234



4,153
(1)


4,013
(1)


2,880
(1)


1,099
(1)


3,979
(1)


3,527
(1)Operating Income (Loss)


5,697



2,049



3,302



2,983



(161
)


2,822



3,782Interest Expense


2,828



1,980



1,213



1,052



45



1,097



347Other (Income) Expense, net


(36
)


(99
)


(102
)


(5
)






(5
)


19Income (Loss) Before Income Taxes


2,905



168



2,191



1,936



(206
)


1,730



3,416Provision (Benefit) for Income Taxes


307



(564
)


799



642



66



708



1,367Net Income (Loss)

$
2,598


$
732


$
1,392


$
1,294


$
(272
)

$
1,022


$
2,049Operating DataTons Shipped


50,706



39,823



38,204



27,769



4,575



32,344



29,960Net Selling Price per Ton

$
1,472


$
1,511


$
1,10


$
1,431


$
1,572


$
1,451


$
1,486Total Paper Usage  Tons


40,429



38,632



38,204



26,824



4,575



31,399



30,050Total Paper Cost per Ton

$
753


$
788


$
822


$
710


$
671


$
705


$
690Total Paper Cost

$
38,181


$
31,381


$
31,420


$
19,050


$
3,071


$
22,121


$
20,729Cash Flow DataCash Flow Provided by (Used in):Operating Activities

$
8,382


$
2,607


$
2,644


$
4,722


$
847


$
5,569


$
3,846Investing Activities

$
(318
)

$
(18,133
)

$
(19,238
)

$
(19,794
)

$
(112
)

$
(19,906
)

$
(619
)Financing Activities

$
(8,064
)

$
15,151


$
16,487


$
15,067


$
(445
)

$
14,622


$
(3,247
)     (1)
    
    Cost of sales, Gross profit and SG&A have been restated to
    conform with the 2007 reclassification of certain costs from
    SG&A to Cost of sales.  As of December 31,Successor


Predecessor2007


2006


2005


2004


2003Working Capital

$
1,714


$
5,025


$
4,514


$
3,399


$
3,194Net Property, Plant and Equipment

$
56,856


$
58,039


$
42,194


$
24,492


$
14,335Total Assets

$
68,303


$
71,028


$
53,710


$
33,407


$
22,960Long-Term Debt, net of current portion

$
23,264


$
31,575


$
17,002


$
15,145


$
4,846Total Stockholders Equity

$
28,042


$
24,704


$
23,712


$
6,941


$
10,050   Item 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  You should read the following discussion of our financial
    condition and results of operations in conjunction with the
    audited financial statements and the notes to those statements
    included elsewhere in this
    Form 10-K.
    This discussion contains forward-looking statements that involve
    risks and uncertainties. You should specifically consider the
    various risk factors identified in this filing that could cause
    actual results to differ materially from those anticipated in
    these forward-looking statements.
 19




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##### Table of Contents



Executive
    Overview
  What were
    our key 2007 financial results?
  
    Our net sales were $74.6 million in 2007, up 24% from
    $60.2 million in 2006.
    We generated operating income of $5.7 million in 2007, up
    178% from operating income of $2.0 million in 2006.
    Our earnings per diluted share were $0.40 per diluted common
    share in 2007 compared with $0.11 per diluted common share in
    2006.
    We generated $8.4 million in positive operating cash flow
    in 2007 compared with $2.6 million in each of the preceding
    two years. We have generated positive operating cash flow each
    of the last seven years.  What did
    we focus on in 2007?
      What
    challenges and opportunities did our business face in
    2007?
    What will
    we focus on in 2008?
     20




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##### Table of Contents



Business
    Overview
      
    the market price of our product;
    the cost of recycled waste paper used in producing paper;
    the efficiency of operations in both our paper mill and
    converting plant; and
    energy costs.      Comparative
    Years Ended December 31, 2007, 2006 and 2005
  Net
    Sales
  Twelve Months Ended December 31,2007


2006


2005(In thousands, except price per ton and tons)Net sales

$
74,648


$
60,190


$
57,700Total tons shipped


50,706



39,823



38,204Average price per ton

$
1,472


$
1,511


$
1,510    21




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##### Table of Contents



start-up
  Cost of
    Sales
  Twelve Months Ended December 31,2007


2006


2005(In thousands, except gross profit margin%)Cost of paper

$
38,181


$
31,381


$
31,420Non-paper materials, labor, supplies, etc.


22,535



20,353



17,464Sub-total

$
60,716


$
51,734


$
48,884Depreciation


3,001



2,254



1,501Cost of sales

$
63,717


$
53,988


$
50,385Gross Profit

$
10,931


$
6,202


$
7,315Gross Profit Margin%


14.6
%


10.3
%


12.7
%     started-up
  start-up
    22




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##### Table of Contents



Twelve Months Ended December 31,2007


2006


2005Paper usage (tons)Converted-internal


38,987



31,662



26,051Converted-purchased


1,442



6,970



12,153Total converted


40,429



38,632



38,204Third-party parent roll sales


10,277



1,191



Paper costs per tonCost per ton produced internally

$
741


$
730


$
729Cost per ton purchased from third parties

$
1,162


$
1,062


$
1,024Total cost per ton consumed

$
753


$
788


$
822Total paper costs (in thousands)Cost of internally produced paper

$
36,505


$
23,979


$
18,979Cost of paper purchased from third parties


1,676



7,402



12,441Total paper costs

$
38,181


$
31,381


$
31,420   start-up ramp-up
  start-up start-up
  Gross
    Profit
     23




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##### Table of Contents



Selling,
    General and Administrative Expenses
  Twelve Months Ended December 31,2007


2006


2005(In thousands, except SG&A as a% of net sales)Commission expense

$
959


$
840


$
879Other S,G&A expenses


4,275



3,313



3,134Selling, General & Adm exp

$
5,234


$
4,153


$
4,013SG&A as a% of net sales


7.0
%


6.9
%


7.0
%      24




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##### Table of Contents



Operating
    Income
    Interest
    and Other Expense
  Twelve Months Ended December 31,2007


2006


2005(In thousands)Interest expense

$
2,828


$
1,980


$
1,213Other (income) expense, net

$
(36
)

$
(99
)

$
(102
)          25




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##### Table of Contents



Income
    Before Income Taxes
    Income
    Tax Provision (Benefit)
        LIQUIDITY
    AND CAPITAL RESOURCES
  Overview
    Form S-1 333-124173), 3-for-2
  paid-in-capital); and
  
    direct expenses of $859,000 (charged against additional paid-in
    capital), including legal fees, printing costs, accounting fees,
    qualified independent underwriter fees and other miscellaneous
    direct expenses. 26




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##### Table of Contents



build-up
        Twelve Months Ended December 31,2007


2006


2005(In thousands)Cash flow provided by (used in):Operating activities

$
8,382


$
2,607


$
2,644Investing activities

$
(318
)

$
(18,133
)

$
(19,238
)Financing activities

$
(8,064
)

$
15,151


$
16,487      27




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##### Table of Contents



start-up
      
    a $8.0 million revolving credit facility with a
    3-year term
    ($791,000 outstanding at December 31, 2007, including
    $498,000 of bank overdrafts);
    a $10.0 million Term Loan A with a ten-year term, no
    principal repayments for the first 24 months and then will
    be amortized as if it had an
    18-year life
    ($10.0 million outstanding at December 31, 2007);
    a $16.5 million Term Loan B with a four year-term and is
    being amortized as if it had a six-year life ($14.9 million
    outstanding at December 31, 2007); and
    a $3.0 million capital expenditures facility with a
    four-year term that will be amortized as if it had a five-year
    life ($0 outstanding at December 31, 2007).     28




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##### Table of Contents



Contractual
    Obligations
      Payments Due by PeriodYearsContractual Cash Obligations

Total


1


2 and 3


4 and 5


after 5($ thousands)Long-term debt(1)

$
25,655


$
2,391


$
6,619


$
7,796


$
8,849Interest payments(2)(3)

$
7,226


$
1,783


$
2,915


$
1,237


$
1,291Total

$
32,881


$
4,174


$
9,534


$
9,033


$
10,140     (1)
    
    Under our revolving credit and term loan agreements, the
    maturity of outstanding debt could be accelerated if we do not
    maintain certain financial covenants. At December 31, 2007,
    we were in compliance with our loan covenants.(2)
    
    These amounts assume interest payments at the year-end borrowing
    amount and rate for our revolving credit facility. The amount
    borrowed in future years is dependent on our free cash flow from
    time-to-time.(3)
    
    Interest payments on the term loans have been calculated based
    on the interest rate in effect as of December 31, 2007.  Critical
    Accounting Policies and Estimates
    Accounts Receivable.
 29




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##### Table of Contents



Inventory. (first-in, first-in,
  New
    Accounting Pronouncements
          Non-GAAP Discussion
     30




---



##### Table of Contents




    it does not reflect our cash expenditures for capital
    expenditures;
    it does not reflect changes in, or cash requirements for, our
    working capital requirements;
    it does not reflect the interest expense, or the cash
    requirements necessary to service interest or principal payments
    on our indebtedness;
    although depreciation and amortization are non-cash charges, the
    assets being depreciated and amortized will often have to be
    replaced in the future, and EBITDA does not reflect cash
    requirements for such replacements; and
    other companies, including other companies in our industry, may
    calculate these measures differently than we do, limiting their
    usefulness as a comparative measure.      Twelve Months Ended December 31,2007


2006


2005(In thousands, except% of net sales)Net income

$
2,598


$
732


$
1,392Plus: Interest expense, net


2,828



1,980



1,213Plus: Income tax (benefit) expense


307



(564
)


799Plus: Depreciation


3,001



2,254



1,501EBITDA

$
8,734


$
4,402


$
4,905% of net sales


11.7
%


7.3
%


8.5
%       SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-K,
  
    our business strategy; 31




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##### Table of Contents




    the market opportunity for our products, including expected
    demand for our products;
    our estimates regarding our capital requirements; and
    any of our other plans, objectives, expectations and intentions
    contained in this
    Form 10-K
    that are not historical facts.      
    competition in our industry;
    adverse developments in our relationships with key customers;
    impairment of ability to meet our obligations and restrictions
    on future operations due to our substantial debt;
    availability and price of energy;
    variable interest rate exposure;
    disruption in supply or cost of SBS paper;
    the loss of key personnel;
    labor interruptions;
    natural disaster or other disruption to our facility;
    ability to finance the capital requirements of our business;
    cost to comply with government regulations; and
    failure to maintain an effective system of internal controls
    necessary to accurately report our financial results and prevent
    fraud.  You should read this
    Form 10-K
    completely and with the understanding that our actual results
    may be materially different from what we expect. We undertake no
    duty to update these forward-looking statements after the date
    of this
    Form 10-K,
    even though our situation may change in the future. We qualify
    all of our forward-looking statements by these cautionary
    statements.
  Item 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   32




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##### Table of Contents



Item 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  INDEX TO
    FINANCIAL STATEMENTS
  Report of Independent Registered Public
    Accounting Firm


34Balance Sheets as of December 31, 2007 and
    2006


35Statements of Income for the Years ended
    December 31, 2007, 2006 and 2005


36Statements of Changes in Stockholders
    Equity for the Years ended December 31, 2007, 2006 and
    2005


37Statements of Cash Flows for the Years ended
    December 31, 2007, 2006 and 2005


38Notes to Financial Statements


39-48   33




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                   34




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  BALANCE
    SHEETS
  As ofDecember 31,


December 31,2007


2006(Dollars in thousands,except share data)ASSETSCurrent assets:Cash

$
3


$
3Accounts receivable, net of allowance of $100 in 2007 and 2006


5,527



5,089Inventories, net


4,874



4,379Restricted certificate of deposit






1,500Income taxes receivable


24



1,242Prepaid expenses


381



306Deferred income taxes


516



346Total current assets


11,325



12,865Property, plant and equipment


64,899



63,081Accumulated depreciation


(8,043
)


(5,042
)Net property, plant and equipment


56,856



58,039Deferred debt issuance costs, net of accumulated amortization of
    $570 in 2007 and $424 in 2006


122



124Total assets

$
68,303


$
71,028LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
4,760


$
3,772Accrued liabilities


2,460



1,805Current portion of long-term debt


2,391



2,263Total current liabilities


9,611



7,840Long-term debt, net of unamortized discount of $0 in 2007 and
    $74 in 2006


23,264



31,575Deferred income taxes


7,386



6,909Stockholders equity:Common stock, $.001 par value, 25,000,000 and
    10,000,000 shares authorized in 2007 and 2006,
    respectively, 6,322,648 and 6,234,346 shares issued and
    outstanding in 2007 and 2006, respectively


6



6Additional paid-in capital


21,879



21,139Common stock warrants


141



141Retained earnings


6,016



3,418Total stockholders equity


28,042



24,704Total liabilities and stockholders equity

$
68,303


$
71,028    35




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  STATEMENTS
    OF INCOME
 Years
    Ended December 31, 2007, 2006 and 2005
  2007


2006


2005(Dollars in thousands, except share and per share data)Net sales

$
74,648


$
60,190


$
57,700Cost of sales


63,717



53,988



50,385Gross profit


10,931



6,202



7,315Selling, general and administrative expenses


5,234



4,153



4,013Operating income


5,697



2,049



3,302Interest expense


2,828



1,980



1,213Other (income) expense, net


(36
)


(99
)


(102
)Income before income taxes


2,905



168



2,191Provision (benefit) for income taxes:Current






(1,047
)


663Deferred


307



483



136307



(564
)


799Net income

$
2,598


$
732


$
1,392Net income per share:Basic

$
0.42


$
0.12


$
0.31Diluted

$
0.40


$
0.11


$
0.30Shares used in calculating net income per share:Basic


6,255,877



6,234,346



4,453,254Diluted


6,464,863



6,558,454



4,594,412    36




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##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY



STATEMENTS
    OF CHANGES IN STOCKHOLDERS EQUITY Years
    ended December 31, 2005, 2006 and 2007
  Additional


Common StockCommon Stock


Paid-in


Warrants


RetainedShares


Value


Capital


Shares


Value


Earnings


Total(Dollars in thousands, except share amounts)Balance at December 31, 2004


2,000,000


$
2


$
5,504



82,607


$
141


$
1,294


$
6,941Issuance of Common Stock , net of offering expenses of $2,239


2,156,250



2



15,009















15,011Stock based compensation










368















368Net income






















1,392



1,392Balance at December 31, 2005


4,156,250



4



20,881



82,607



141



2,686



23,712Effect of
    3-for-2
    stock split


2,078,096



2



(2
)














Stock based compensation










260















260Net income






















732



732Balance at December 31, 2006


6,234,346



6



21,139



82,607



141



3,418



24,704Stock based compensation










402















402Net income






















2,598



2,598Purchase of Common Stock by former CEO


139,500







743















743Purchase by the Company of shares from former CEO


(51,198
)






(405
)














(405
)Balance at December 31, 2007


6,322,648


$
6


$
21,879



82,607


$
141


$
6,016


$
28,042    37




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##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  STATEMENTS
    OF CASH FLOWS
 Years
    ended December 31, 2007, 2006 and 2005
  2007


2006


2005(Dollars in thousands)Cash Flows From Operating ActivitiesNet income

$
2,598


$
732


$
1,392Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


3,222



2,472



1,688Provision for doubtful accounts






(19
)


46Deferred income taxes


307



483



136Stock option plan expense


402



260



368Foreign currency transaction gain






35



(35
)Unrealized loss on foreign exchange contracts






(74
)


74Changes in cash due to changes in operating assets and
    liabilities, net of acquisition:Accounts receivable


(438
)


(890
)


(617
)Inventories


(495
)


41



(1,372
)Income taxes receivable


1,218



(1,148
)


188Prepaid expenses


(75
)


152



(128
)Accounts payable


988



895



697Accrued liabilities


655



(332
)


207Net cash provided by operating activities


8,382



2,607



2,644Cash Flows From Investing ActivitiesPurchases of investment securities and restricted certificate of
    deposit










(17,259
)Proceeds from the sale of investment securities and restricted
    certificate of deposit


1,500







16,509Purchases of property, plant and equipment


(1,818
)


(18,133
)


(18,488
)Net cash used in investing activities


(318
)


(18,133
)


(19,238
)Cash Flows From Financing ActivitiesProceeds from issuance of common stock










17,250Cost of common stock and warrants issued










(2,239
)New borrowings on long-term debt


26,500







Retirement of borrowings on long-term debt


(25,866
)






Borrowings under construction loan






15,000



Principal payments on long-term debt


(2,472
)


(1,586
)


(1,643
)Retirement of subordinated debentures


(2,150
)






Net borrowings (repayments) on revolving credit line


(4,270
)


1,767



3,293Purchase of common stock by former CEO, pursuant to vested stock
    options


743







Purchase by the Company of common stock from former CEO


(405
)






Deferred debt issuance costs


(144
)


(30
)


(174
)Net cash provided by (used in) financing activities


(8,064
)


15,151



16,487Net increase (decrease) in cash






(375
)


(107
)Cash, beginning


3



378



485Cash, ending

$
3


$
3


$
378Supplemental Disclosure:Interest paid

$
2,788


$
2,615


$
1,445Income taxes paid

$



$
221


$
475Supplemental Disclosure of Non-Cash Investing and Financing
    Activities:Contractual obligation for purchase of paper machine

$



$



$
681    38




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY



NOTES TO
    FINANCIAL STATEMENTS

December 31,
    2007, 2006 and 2005  Note 1 
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
    Business
    Summary
    of Significant Accounting Policies
  Fair
    value of financial instruments
    Accounts
    receivable
    Inventories
  (first-in, first-in,
  Property,
    plant and equipment
    Impairment
    of long-lived assets
   39




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Income
    taxes
    Deferred
    debt issuance costs
    Discount
    on debt securities issued
    Stock
    splits
  3-for-2
  Stock
    option expense
    Revenue
    recognition
    Shipping
    and handling costs
    Advertising
    costs
   40




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Use of
    estimates
    Reclassification
    New
    pronouncements
            Note 2 
    Purchase
    Commitment and Foreign Currency Derivatives     41




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Note 3 
    Inventories    2007


2006($ thousands)Raw materials

$
1,652


$
1,577Bulk paper rolls


631



536Converted finished goods


2,591



2,266$
4,874


$
4,379   Note 4 
    Property,
    Plant and Equipment    EstimatedUseful2007


2006


Lives($ thousands)Land

$
379


$
379


Buildings


10,394



10,394


40Machinery and equipment


50,271



49,979


5 to 30Vehicles


314



295


5Nondepreciable machinery and equipment (parts and spares)


2,357



1,965


Construction-in-process


1,184



69


$
64,899


$
63,081    42




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Note 5 
    Long-Term
    Debt    2007


2006($ thousands)Revolving line of credit, maturing on April 9, 2010

$
791


$
5,060Term Loan B, maturing on April 9, 2011, due in monthly
    installments of $292,000, including interest


14,864Term Loan A, maturing on April 9, 2017, due in monthly
    installments of $83,000, including interest, beginning in May
    2009


10,000Term note, due in monthly installments of $224,000, including
    interest






11,779Construction loan, converted to term note, due in monthly
    installments of $192,000, including interest






14,923Subordinated debentures, retired in 2007






2,07625,655



33,838Less current portion


2,391



2,263$
23,264


$
31,575     AnnualPaymentYear

Amount($ thousands)2008


2,3912009


2,7572010


3,8622011


7,4512012


345after 2012


8,849$
25,655     3-year
  18-year
       43




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
          Note 6 
    Income
    Taxes    2007


2006($ thousands)Deferred income taxes  current Inventories

$
419


$
311Prepaid expenses


(133
)


(125
)Accounts receivable


38



38Accrued vacation


192



122Deferred income tax assets  current

$
516


$
346Deferred income taxes  noncurrent Plant and equipment

$
(12,289
)

$
(8,810
)Federal NOL Carryforward


2,031



367State NOL Carryforward, net of Federal tax effect


271



81State Investment Tax Credit Carryforward, net of Federal tax
    effect


1,234



730Indian Employment Credit Carryforward


917



647Alternative Minimum Tax Credit Carryforward


151



76Non-qualified Stock Option Benefits


299



Deferred income tax liabilities  noncurrent

$
(7,386
)

$
(6,909
)  44




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
          Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2007


2006


2005Statutory tax rate


34.0
%


34.0
%


34.0
%State income taxes, net of U.S. federal tax benefit


4.1
%


11.9
%


1.2
%Indian employment credits


(5.6
)%


(87.5
)%


(5.7
)%Employee and board stock compensation


(6.6
)%


52.4
%


6.9
%State investment tax credits


(16.4
)%


(351.8
)%


0.0
%Other


1.1
%


5.3
%


0.1
%10.6
%


(335.7
)%


36.5
%   Note 7 
    Earnings
    per Share    Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2007


2006


2005Net income ($ thousands)

$
2,598


$
732


$
1,392Weighted average shares outstanding


6,255,877



6,234,346



4,453,254Effect of Stock Options


98,475



166,527



62,441Effect of dilutive warrants


110,511



157,581



78,717Weighted average shares outstanding  assuming dilution


6,464,863



6,558,454



4,594,412Earnings per common share:Basic

$
0.42


$
0.12


$
0.31Diluted

$
0.40


$
0.11


$
0.30Stock Options not considered above because they were
    anti-dilutive


33,750



11,250



  45




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Note 8 
    Stock
    Incentive Plan        Weighted Average


Weighted Average


Weighted Average


AggregateExercise


Fair Value of


Remaining


IntrinsicNumber


Price


Options


Contractual Life


ValueBalance, December 31, 2004


















Granted


416,250


$
5.37


$
2.40







Forfeited


(12,000
)

$
5.33











Balance, December 31, 2005


404,250


$
5.37











Granted


18,750


$
9.23


$
3.93







Balance, December 31, 2006


423,000


$
5.53











Granted


272,500


$
6.73


$
3.08







Exercised


(139,500
)

$
5.33


$
2.39






$
360,000Forfeited


(96,000
)

$
5.33


$
2.39







Balance, December 31, 2007


460,000


$
6.35


$
2.87



8.60 years


$
1,265,000Exercisable at December 31, 2007


205,000


$
6.16


$
2.72



8.28 years


$
603,000     Grant

Number


Exercise


Risk-Free


Estimated


Dividend


Forfeiture


ExpectedDate

of Shares


Price


Interest Rate


Volatility


Yield


Rate


LifeApr-05


405,000


$
5.33



3.92
%


40
%


None



0
%


5-7 yearsSep-05


11,250


$
6.53



4.03
%


42
%


None



0
%


5 yearsFeb-06


3,750


$
7.61



4.56
%


41
%


None



0
%


5 yearsJun-06


11,250


$
10.05



4.97
%


40
%


None



0
%


5 yearsDec-06


3,750


$
8.37



4.49
%


40
%


None



0
%


5 yearsFeb-07


3,750


$
8.58



4.83
%


40
%


None



0
%


5 yearsJun-07


28,750


$
5.18



5.09
%


38
%


None



0
%


5 yearsAug-07


225,000


$
6.81



4.63
%


40
%


None



0
%


5-7 yearsOct-07


15,000


$
8.05



4.47
%


41
%


None



0
%


5-7 years  46




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Note 9 
    Major
    Customers and Concentration of Credit Risk      Note 10 
    Employee
    Incentive Bonus and Retirement Plans    Note 11 
    Related
    Party Transactions     47




---



##### Table of Contents



ORCHIDS
    PAPER PRODUCTS COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Note 12 
    Selected
    Quarterly Financial Data (Unaudited)  2007First Quarter


Second Quarter


Third Quarter


Fourth Quarter(Dollars in thousands, except per share data)Sales

$
16,637


$
18,515


$
19,218


$
20,278Gross Profit

$
1,732
(1)

$
2,753
(1)

$
3,221
(1)

$
3,225Operating Income

$
673


$
1,583


$
1,925


$
1,516Net Income (Loss)

$
(131
)

$
743


$
1,136


$
850Basic Earnings (Loss) per share

$
(0.02
)

$
0.12


$
0.18


$
0.14Diluted Earnings (Loss) per share

$
(0.02
)

$
0.12


$
0.17


$
0.13Price per common shareHigh

$
8.65


$
7.08


$
8.78


$
9.85Low

$
6.67


$
5.01


$
5.25


$
7.25   2006First Quarter


Second Quarter


Third Quarter


Fourth Quarter(Dollars in thousands, except per share data)Sales

$
14,099


$
13,675


$
15,154


$
17,262Gross Profit

$
1,351
(1)

$
788
(1)

$
1,670
(1)

$
2,392
(1)Operating Income (Loss)

$
315


$
(275
)

$
733


$
1,276Net Income (Loss)

$
182


$
(293
)

$
(151
)

$
994Basic Earnings (Loss) per share

$
0.03
(2)

$
(0.05
)

$
(0.02
)

$
0.16Diluted Earnings (Loss) per share

$
0.03
(2)

$
(0.05
)

$
(0.02
)

$
0.15Price per common shareHigh

$
9.31
(2)

$
10.53


$
11.36


$
9.34Low

$
6.70
(2)

$
9.00


$
8.99


$
8.20     (1)
    
    Gross Profit has been restated to reflect reclassification of
    certain costs from SG&A to Cost of Sales.(2)
    
    Earnings per share and Price per common share have been restated
    to reflect the
    3-for-2
    stock split effected in July 2006. 48




---



##### Table of Contents



Item 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    Item 9A.
    CONTROLS
    AND PROCEDURES  (a)
    Evaluation
    of Disclosure Controls and Procedures:  Rule 13a-15(e) Rule 15d-15(e) Form 10-K,
  (b)
    Managements
    Report on Internal Control Over Financial
    Reporting      Internal Control  Integrated Framework
  Form 10-K.
  (c)
    Changes
    in Internal Control Over Financial Reporting  Rule 13a-15(f)
  Item 9B.
    OTHER
    INFORMATION   49




---



##### Table of Contents



PART III  Item 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE      Regulation S-K
        (918) 825-0616
    Item 11.
    EXECUTIVE
    COMPENSATION    Item 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    Securities
    Authorized for Issuance Under Equity Compensation Plan
  Number of SecuritiesRemaining Available forFuture Issuance UnderNumber of Securities to


Weighted-Average


Equity Compensationbe Issued Upon Exercise


Exercise Price of


Plans (Excludingof Outstanding Options


Outstanding Options,


Securities Reflected inWarrants and Rights


Warrants and Rights


Column (a)Plan Category

(a)


(b)


(c)Equity compensation Plans approved by security holders


460,000


$
6.35



98,000Equity compensation plans not approved by security holders


225,000


$
6.40



Total


685,000







98,000  50




---



##### Table of Contents



Item 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    Item 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   PART IV  Item 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES         51




---



##### Table of Contents



Orchids
    Paper Products Company
   Schedule II  Valuation and Qualifying
    Accounts
    Years ended December 31, 2007, 2006 and 2005
  Balance at


Additions Charged


Deductions


Balance atBeginning of


(Credited) to Costs


Describe


End ofPeriod


and Expenses


(1)(2)


Period(In thousands)Accounts Receivable Reserve:Year ended December 31, 2007Bad Debt Reserve

$
100


$



$



$
100Year ended December 31, 2006Bad Debt Reserve

$
125


$
(19
)

$
6


$
100Year ended December 31, 2005Bad Debt Reserve

$
90


$
46


$
11


$
125Inventory Valuation Reserve:Year ended December 31, 2007Inventory Valuation Reserve

$
25


$
33


$
26


$
32Year ended December 31, 2006Inventory Valuation Reserve

$
24


$
45


$
44


$
25Year ended December 31, 2005Inventory Valuation Reserve

$
39


$



$
15


$
24     (1)
    
    Write-off of uncollectible accounts, net of recoveries(2)
    
    Write-off of obsolete inventory and physical inventory
    adjustments     52




---



##### Table of Contents



SIGNATURES      By:
    /s/  Robert
    A. Snyder     By:
    /s/  Keith
    R. Schroeder       POWER OF
    ATTORNEY
  Form 10-K
    Signatures

Title

Date/s/  Jay
    ShusterJay
    Shuster

Chairman of the Board of Directors

March 18, 2008/s/  Robert
    A. SnyderRobert
    A. Snyder

Chief Executive Officer
    (Principal Executive Officer)

March 18, 2008/s/  Gary
    P. ArnoldGary
    P. Arnold

Director

March 18, 2008/s/  Steven
    BerlinSteven
    Berlin

Director

March 18, 2008/s/  John
    G. GuttillaJohn
    G. Guttilla

Director

March 18, 2008/s/  Douglas
    E. HaileyDouglas
    E. Hailey

Director

March 18, 2008/s/  Jeff
    SchoenJeff
    Schoen

Director

March 18, 2008/s/  Keith
    R. SchroederKeith
    R. Schroeder

Chief Financial Officer
    (Principal Financial and 
    Accounting Officer)

March 18, 2008  53




---



##### Table of Contents



Exhibit Index
  EXHIBITS
  3
.1

Amended and Restated Certificate of Incorporation of the
    Registrant, incorporated by reference to Orchids Paper Products
    Company
    Form S-1
    (File
    No. 333-124173)
    dated April 19, 2005, exhibit 3.1.3
.1.1

Certificate of Amendment to Amended and Restated Certificate of
    Incorporation of the Registrant, incorporated by reference to
    Orchids Paper Products Company
    Form 10-Q
    (File
    No. 001-32563)
    dated August 14, 2007, exhibit 3.1.1.3
.2

Amended and Restated Bylaws of the Registrant, incorporated by
    reference to Orchids Paper Products Company
    Form S-1
    (File
    No. 333-124173)
    dated April 19, 2005, exhibit 3.2.4
.1

Specimen Stock Certificate, incorporated by reference to Orchids
    Paper Products Company
    Form S-1
    (File
    No. 333-124173)
    dated June 24, 2005, exhibit 4.1.4
.2

Form of Subordinated Debenture, incorporated by reference to
    Orchids Paper Products Company
    Form S-1
    (File
    No. 333-124173)
    dated April 19, 2005, exhibit 4.8.10
.1

Amended and Restated Management Services Agreement, dated
    April 19, 2005, between Weatherly Group, LLC, Taglich
    Brothers, Inc. and the Registrant, incorporated by reference to
    Orchids Paper Products Company
    Form S-1
    (File
    No. 333-124173)
    dated April 19, 2005, exhibit 10.1.10
.2 #

2005 Stock Incentive Plan, incorporated by reference to Orchids
    Paper Products Company
    Form S-1
    (File
    No. 333-124173)
    dated April 19, 2005, exhibit 10.2.10
.3 #

Employment Agreement dated March 1, 2004, between Michael
    P. Sage and the Registrant, incorporated by reference to Orchids
    Paper Products Company
    Form S-1
    (File
    No. 333-124173)
    dated April 19, 2005, exhibit 10.3.10
.4 #

Employment Agreement dated March 1, 2004, between Keith R.
    Schroeder and the Registrant, incorporated by reference to
    Orchids Paper Products Company
    Form S-1
    (File
    No. 333-124173)
    dated April 19, 2005, exhibit 10.4.10
.5 #

Form of Indemnification Agreement between Registrant and each of
    its Directors and Officers, incorporated by reference to Orchids
    Paper Products Company
    Form S-1/A
    (File
    No. 333-124173)
    dated June 1, 2005, exhibit 10.5.10
.6

Form of Warrant issued by Orchids Acquisition Group, Inc. in
    connection with the acquisition of Orchards Paper Products
    Company, incorporated by reference to Orchids Paper Products
    Company
    Form S-1
    (File
    No. 333-124173)
    dated April 19, 2005, exhibit 10.6.10
.7

Form of Warrant issuable to designees of the Underwriter,
    incorporated by reference to Orchids Paper Products Company
    Form S-1/A
    (File
    No. 333-124173)
    dated June 1, 2005, exhibit 10.7.10
.8

Purchasing documents for tissue machine, incorporated by
    reference to Orchids Paper Products Company
    Form S-1
    (File
    No. 333-124173)
    dated April 19, 2005, exhibit 10.8.10
.9

Amended and Restated Agented Credit Agreement, dated as of
    June 24, 2005, among the Registrant, Bank of Oklahoma,
    N.A., BancFirst and Commerce Bank, N.A., incorporated by
    reference to Orchids Paper Products Company
    Form S-1
    (File
    No. 333-124173)
    dated June 24, 2005, exhibit 4.9.10
.10

Amendment One to Amended and Restated Agented Credit Agreement
    dated June 30, 2006 among the Registrant, Bank of Oklahoma,
    N.A., BancFirst and Commerce Bank, N.A., incorporated by
    reference to Orchids Paper Products Company
    Form 10-Q
    (File
    No. 001-32563)
    dated August 4, 2006, exhibit 4.1.10
.11

Amendment Two to Amended and Restated Agented Credit Agreement
    dated October 31, 2006 among the Registrant, Bank of
    Oklahoma, N.A., BancFirst and Commerce Bank, N.A., incorporated
    by reference to Orchids Paper Products Company
    Form 10-Q
    (File
    No. 001-32563)
    dated November 3, 2006, exhibit 4.1.10
.12

Second Amended and Restated Agented Credit Agreement, dated as
    of April 9, 2007, among the Registrant, Bank of Oklahoma,
    N.A., BancFirst and Commerce Bank, N.A., incorporated by
    reference to Orchids Paper Products Company
    Form 8-K
    (File
    No. 001-32563)
    dated April 23, 2007, exhibit 10.1.10
.13

Amendment One to Second Amended and Restated Agented Credit
    Agreement dated October 25, 2007 among the Registrant, Bank
    of Oklahoma, N.A., BancFirst and Commerce Bank, N.A.,
    incorporated by reference to Orchids Paper Products Company
    Form 10-Q
    (File
    No. 001-32563)
    dated November 5, 2007, exhibit 10.2.10
.14#

Employment Agreement dated August 20, 2007, between Robert
    A. Snyder and the Registrant, incorporated by reference to
    Orchids Paper Products Company
    Form 8-K
    (File
    No. 001-32563)
    dated August 22, 2007, exhibit 10.1.10
.15

Amendment Two to Second Amended and Restated Agented Credit
    Agreement dated March 6, 2008 among the Registrant, Bank of
    Oklahoma, N.A., BancFirst and Commerce Bank, N.A., incorporated
    by reference to Orchids Paper Products Company
    Form 8-K
    (File
    No. 001-32563)
    dated March 11, 2008, exhibit 10.1.21


Subsidiaries of the Company.23
.1

Consent of Independent Registered Public Accounting
    Firm  Tullius Taylor Sartain & Sartain LLP.31
.1

Certification pursuant to Section 302(a) of the Sarbanes-Oxley
    Act of 2002.31
.2

Certification pursuant to Section 302(a) of the Sarbanes-Oxley
    Act of 2002.32


Certification pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.     #
    
    Indicates management contract or compensatory plan 54