OVALE
S.A.
 (A
Development Stage Company)
 Financial
Statements
 For the
years ended December 31, 2004 and 2003
 and the
period January 1 st to April
30 th 2005
 
 
 
 
 
 
  
  
 Balance
      SheetsStatements
      of OperationStatements
      of Stockholders’ EquityStatements
      of Cash FlowsNotes
      to Financial Statements
 
 
  
 OVALE
      S.A.(A
      Development Stage Company)CONSOLIDATED
      BALANCE SHEETSApril 30,
    
    December
      31,
    
    December
      31,2005
    
    2004
    
    2003(Unaudited)
    
    (Audited)
    
    (Audited)ASSETS**Current
      assets**Cash
      and cash equivalents
    
    $
    229,348
    
    $
    236,705
    
    $
    131,075Accounts
      receivable
    
    
    8,044
    
    
    33,708
    
    
    1,805Other
      receivables
    
    
    47,493
    
    
    27,298
    
    
    132,855Inventory
    
    
    188,393
    
    
    217,914
    
    
    203,437Deferred
      charges and prepaid expenses
    
    
    86,519
    
    
    65,547
    
    
    66,366Total
      current assets
    
    
    559,797
    
    
    581,172
    
    
    535,538Property,
      plant, and equipment, net
    
    
    380,268
    
    
    416,811
    
    
    184,617Deposits
    
    
    25,027
    
    
    26,532
    
    
    23,500Goodwill
    
    
    401,824
    
    
    401,824
    
    
    401,824Total
      assets
    
    $
    1,366,916
    
    $
    1,426,339
    
    $
    1,145,479**LIABILITIES
      AND SHAREHOLDERS EQUITY****Current
      liabilities**Bank
      line of credit
    
    $
    263,753
    
    $
    207,115
    
    $
    236,274Accounts
      payable and accrued exp.
    
    
    240,164
    
    
    160,789
    
    
    144,172Other
      Payables
    
    
    115,049
    
    
    281,538
    
    
    79,512Loans
      from related party
    
    
    179,996
    
    
    179,994
    
    
    214,999Loan
      from shareholder
    
    
    1,719,889
    
    
    1,386,591
    
    
    361,768Total
      current liabilities
    
    
    2,518,851
    
    
    2,216,027
    
    
    1,036,725**Shareholder's
      equity**Common
      stock, 250 shares authorized issued and outstanding
    
    
    687,310
    
    
    687,310
    
    
    687,310Accumulated
      deficit
    
    
    (1,753,789
    )
    
    (1,329,733
    )
    
    (523,730
    )Cumul.
      foreign currency translation
    
    
    (
      85,456
    )
    
    (147,265
    )
    
    (
      54,826
    )(1,151,935
    )
    
    (789,688
    )
    
    108,754Tot.
      liabilities and stockholder’s equity
    
    $
    1,366,916
    
    $
    1,426,339
    
    $
    1,145,479The
      notes to the financial statements are an integral part of this
      statement.
 
 
 
 
 
 
 
 
  -1-
  
 OVALE
      S.A.(A
      Development Stage Company)CONSOLIDATED
      STATEMENT OF OPERATIONSFour
      months
    
    Year
      ended
    
    Year
      ended
    
    From
      inception on October 17, 2002 to
    
    From
      inception on October 17, 2002 toEnded
    
    December
      31,
    
    December
      31,
    
    April
      30,
    
    December
      31,April
      30,2005
    
    2004
    
    2003
    
    2005
    
    2004(Unaudited)
    
    (Audited)
    
    (Audited)
    
    (Unaudited)
    
    (Audited)Sales
    
    $
    169,248
    
    $
    419,256
    
    $
    36,503
    
    $
    625,007
    
    $
    455,759Cost
      of goods sold
    
    
    132,604
    
    
    180,278
    
    
    14,513
    
    
    327,395
    
    
    194,790Gross
      profit
    
    
    36,644
    
    
    238,978
    
    
    21,990
    
    
    297,612
    
    
    260,968Operating
      expenses:Salaries
    
    
    153,824
    
    
    326,320
    
    
    180,409
    
    
    660,553
    
    
    506,729General
      Administrative
    
    
    182,895
    
    
    374,544
    
    
    271,737
    
    
    829,176
    
    
    646,281Marketing
    
    
    106,103
    
    
    258,256
    
    
    129,532
    
    
    493,891
    
    
    387,788Professional
      fees
    
    
    20,735
    
    
    79,535
    
    
    54,143
    
    
    154,413
    
    
    133,678463,557
    
    
    1,038,655
    
    
    635,821
    
    
    2,138,033
    
    
    1,674,476Income
      from operations
    
    
    (426,913
    )
    
    (
      799,677
    )
    
    (613,831
    )
    
    (1,840,421
    )
    
    (1,413,508
    )Other
      income (expense)Interest
      income
    
    
    24
    
    
    111
    
    
    102
    
    
    237
    
    
    213Interest
      expense
    
    
    
    
    
    (20,903
    )
    
    (12,153
    )
    
    (33,056
    )
    
    (33,056
    )Foreign
      exchange
    
    
    
    
    
    2,162
    
    
    14,041
    
    
    16,203
    
    
    16,203Other
    
    
    2,833
    
    
    12,304
    
    
    88,111
    
    
    103,248
    
    
    100,4152,857
    
    
    (6,326
    )
    
    90,101
    
    
    86,632
    
    
    83,775Loss
    
    $
    (424,056
    )
    $
    (806,003
    )
    $
    (523,730
    )
    $
    (1,753,789
    )
    $
    (1,329,733
    )Loss
      per share
    
    
    1,696
    
    
    3,224
    
    
    2,095
    
    
    7,015
    
    
    5,319Weighted
      average shares outstanding
    
    
    250
    
    
    250
    
    
    250
    
    
    250
    
    
    250The
      notes to the financial statements are an integral part of this
      statement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  -2-
  
 OVALE
      S.A.(A
      Development Stage Company)CONSOLIDATED
      STATEMENT OF CASH FLOWSFrom
      Inception
    
    From
      InceptionFour
      months
    
    Year
      ended
    
    Year
      ended
    
    On
      October 17,
    
    On
      October 17ended
    
    December
      31,
    
    December
      31,
    
    2002
      to April 30,
    
    2002
      to December 31,April
      30,2005
    
    2004
    
    2003
    
    2005
    
    2004(Unaudited)
    
    (Audited)
    
    (Audited)
    
    (Unaudited)
    
    (Audited)**Cash
      flow from operating activities**Net
      loss
    
    $
    (424,056
    )
    $
    (806,003
    )
    $
    (523,730
    )
    $
    (1,753,789
    )
    
    (1,329,733
    )Depreciation
    
    
    19,593
    
    
    43,075
    
    
    8,975
    
    
    8,975
    
    
    43,075Inception
      cost amortizationAdjustment
      to reconcile net loss to net cash provided (used) in operating
      activities:Changes
      in assets and liabilities:Inventory
    
    
    29,521
    
    
    (14,477
    )
    
    (203,437
    )
    
    (188,393
    )
    
    (217,914
    )Prepaid
      expenses
    
    
    (20,972
    )
    
    819
    
    
    (
      66,366
    )
    
    (
      86,519
    )
    
    (
      65,547
    )Accounts
      receivable
    
    
    5,469
    
    
    73,654
    
    
    (134,660
    
    
    (55,537
    )
    
    (
      61,006
    )Accounts
      payable
    
    
    79,375
    
    
    16,617
    
    
    144,172
    
    
    240,164
    
    
    160,789Other
      liabilities
    
    
    (166,489
    )
    
    202,026
    
    
    79,512
    
    
    115,049
    
    
    281,538(477,559
    )
    
    (484,289
    )
    
    (695,534
    )
    
    (1,657,382
    )
    
    (1,188,798
    )**Cash
      Flow from Investing activities**Investment
      in fixed asssets
    
    
    16,950
    
    
    (275,269
    )
    
    (193,592
    )
    
    (451,911
    )
    
    (459,886
    )Investment
      in deposits
    
    
    1,505
    
    
    (
      3,032
    )
    
    (23,500
    )
    
    (25,027
    )
    
    (
      26,532
    )Investment
      in goodwill
    
    
    _______
    
    
    ________
    
    
    (401,824
    )
    
    (401,824
    )
    
    (401,824
    )Cash
      provided (used) by investing activities
    
    
    18,455
    
    
    (278,301
    )
    
    (278,301
    )
    
    (618,916
    )
    
    (888,242
    )**Cash
      Flow from Financing Activities**Bank
      line of credit
    
    
    56,638
    
    
    (29,159
    )
    
    236,274
    
    
    263,753
    
    
    207,115Shares
      issued for cash
    
    
    
    
    
    
    
    
    687,310
    
    
    687,310
    
    
    687,310Shareholders
      loan
    
    
    333,298
    
    
    1,024,823
    
    
    361,768
    
    
    1,719,889
    
    
    1,386,591Related
      party loan
    
    
    2
    
    
    (35,005
    )
    
    214,999
    
    
    179,996
    
    
    179,994389,938
    
    
    960,659
    
    
    1,500,351
    
    
    2,850,948
    
    
    2,461,010Effect
      of exchange rate on cash
    
    
    61,809
    
    
    (92,439
    )
    
    (54,826
    )
    
    (85,456
    )
    
    (147,265
    )Net
      change in cash
    
    
    (7,357
    )
    
    105,630
    
    
    131,075
    
    
    229,348
    
    
    236,705Cash
      and cash equivalent, beginning
    
    
    236,705
    
    
    131,075
    
    
    --
    
    
    367,780
    
    
    --Cash
      and cash equivalent, ending
    
    $
    229,348
    
    $
    236,705
    
    $
    131,075
    
    $
    597,128
    
    $
    236,705The
      notes to the financial statements are an integral part of this statement.
 
  -3-
  
 
 OVALE
      S.A.(A
      Development Stage Company)CONSOLIDATED
      STATEMENT OF STOCKHOLDERS EQUITYFOR
      THE PERIOD OCTOBER 17, 2002 (INCEPTION) UNTIL APRIL 30,
    2005OtherNumber
      of
    
    Common
    
    Accumulated
    
    ComprehensiveShares
    
    Stock
    
    Deficit
    
    Income
    
    Total(Audited):Inception,
      October 17, 2002
    
    
    --
    
    
    --
    
    $
    --
    
    $
    --
    
    $
    --Shares
      issued for cash
    
    
    250
    
    
    687,310
    
    
    --
    
    
    --
    
    
    687,310Loss
      for 2002-2003
    
    
    
    
    
    
    
    
    (
      523,730
    )
    
    
    
    
    (523,730
    )Other
      comprehensive income
    
    
    ________
    
    
    _______
    
    
    ________
    
    
    (54,826
    )
    
    (54,826
    )Balances
      at December 31, 2003
    
    
    250
    
    
    687,310
    
    
    (523,730
    )
    
    (54,826
    )
    
    108,754Loss
      for 2004
    
    
    
    
    
    
    
    
    (806,003
    )
    
    
    
    
    (806,003
    )Other
      comprehensive income
    
    
    ________
    
    
    _______
    
    
    _________
    
    
    (92,439
    )
    
    (92,439
    )Balances
      at December 31, 2004
    
    
    250
    
    
    687,310
    
    $
    (1,329,733
    )
    $
    (147,265
    )
    $
    (789,688
    )Unaudited:Loss
      for 1/1/05-4/30/05
    
    
    
    
    
    
    
    
    (424,056
    )
    
    
    
    
    (424,056
    )Other
      comprehensive income
    
    
    ________
    
    
    _______
    
    
    _________
    
    
    61,809
    
    
    61,809Balance
      at April 30, 2005
    
    
    250
    
    
    687,310
    
    $
    (1,753,789
    )
    $
    (85,456
    )
    $
    (1,151,935
    )
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  -4-
  
 
 OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 
 
 
 **NOTE
1 - ORGANIZATION AND BUSINESS**
 
 The
Company was incorporated in Geneva (Switzerland) on October 17, 2002. The
address of its main office is : Boulevard Helvétique 36 - 1027 Geneva CH.
 
 The
Company’s major activity is the designing, manufacturing, trading and direct
sale of fashion products focusing on infants. The goal is to operate numerous
high end proprietary points of sales (POS) worldwide, starting in major European
and American cities. Alternatively and to achieve quickly critical mass, corner
shops can also be established in speciality stores.
 
 In line
with its strategy, the Company organised a subsidiary in France under French
laws as a limited liability corporation (OVALE France S.à.r.L) with 500
authorised and issued shares for a capital of Euro 7,500 ($ 9,375) owned by
OVALE Suisse SA for 499 shares and Mr. Vladimir Fabert, principal shareholder of
OVALE Suisse SA for 1 share.
 
 The
French subsidiary began operations in France on November 12, 2003 with a first
store on Boulevard St. Germain, a prestigious high fashion district of Paris.
The company has an exclusive French designer for its products.
 
 Ovale SA
opened its first store in Geneva (Switzerland) on December 8, 2004 in a
fashionable section of the city. New stores are scheduled to be opened in major
cities on a regular basis (approximately one new store every nine
months).
 
 **NOTE
2 - A DEVELOPMENT STAGE COMPANY**
 
 We are a
development stage company with limited operations, no substantial continuing
source of revenues, only nominal assets, and working capital and stockholders’
deficits. Present operations require substantial capital and until revenues are
sufficient to fund ongoing operations, we will be highly dependent on external
sources of financing to allow us the opportunity to have profitable operations..
We have no internal sources of liquidity and do not expect to generate any
positive cash flows in the immediate future. These conditions raise substantial
doubt about our ability to continue as a going concern.
 
 **NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES**
 
 Use of
estimates in the preparation of financial statements
 
 The
preparation of financial statements, in conformity with the generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
 
 Principles
of consolidation
 
 The
consolidated financial statements include the accounts of the Company, and its
French subsidiary. All significant intercompany transactions and balances are
eliminated in consolidation.
 
 
 
  -5-
  OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 **NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES(Continued)**
 
 Functional
currency
 
 The
Company’s operations are located in Switzerland and in France. The Company
operates in Swiss Francs (CHF). For reporting purposes, assets and liabilities
are translated into US Dollars (US$) at the exchange rates in effect at the
balance sheet date. Revenues and expenses are translated into US Dollars at the
weighted average exchange rates for the period. The net effect of exchange rates
movements resulting from re-measurement into US Dollars is reported in a
separate account within stockholders equity.
 
 Cash
and cash equivalents
 
 The
Company considers all highly liquid investments with original maturity of three
months or less, when purchased, to be cash equivalents. The carrying amount
reported in the balance sheet for cash and cash equivalents approximates its
fair values.
 
 Concentration
of credit risk
 
 The
Company sells its products through its retail outlets principally to customers
for cash. Financial instruments that potentially expose Ovale to concentration
of credit risk consist primarily of cash deposits and accounts receivable. The
Company places its cash deposits with high-credit quality financial
institutions. Accounts receivable represents sales to independent retail stores
with corner shops operated under our label. At the moment these stores are
limited in numbers and we do not have a material receivable against any of them.
The Company’s allowance for bad debts, returns and allowances was US$ 0 at
December 31, 2004 and US$ 0 at December 31, 2003. The Company believes no
significant concentration of credit risk exists with respect to these cash
deposits and accounts receivable.
 
 Inventories
 
 Inventories
consist of finished goods and packing material. We design our own products,
which are manufactured thorough independent international suppliers. Products
are entered in inventory upon delivery and only after inspection and acceptance
of quality. Products that do not meet our quality standards are returned to
suppliers at no costs for us. The Company’s policy of accounting for inventory
is to use average cost method.
 
 Goodwill
and other intangible assets
 
 The
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142,
“Goodwill and Other Intangible Assets”, effective with the beginning of fiscal
year 2003. In accordance with SFAS No. 142, the Company’s goodwill account is no
longer amortized but rather is evaluated for impairment annually or more
frequently if events or changes in circumstances indicate that the asset might
be impaired. Based on this annual evaluation, the Company has concluded that
there is no impairment of its goodwill or indefinite life intangible assets.
 
 Property
and equipment
 
 Property
and equipment are recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets
ranging from three to five years. Property held under capital leases is
amortized over the lesser of the lease term or their estimated useful lives. The
leasehold improvements are amortized over the life of the improvement or the
lease period, whichever is less (9 years).
 
 
 
 
 
  -6-
  
 OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 
 
 **NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued)**
 
 Valuation
of long-lived assets
 
 In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets”, which the Company adopted effective with the beginning of
fiscal year 2003, the Company assesses the carrying value of its long-live
assets for possible impairment based on a review of forecasted operating cash
flows and the profitability of the related business. The Company did not record
any impairment losses in fiscal 2004 or fiscal 2003.
 
 Revenue
recognition
 
 Sales are
recognized at the point of sale, which occurs when merchandise is sold
over-the-counter for consumer transaction or, for the wholesale channels, upon
shipment of merchandise, when title passes to the customer. Allowances for
estimated uncollectible accounts, discounts, returns and allowances are provided
when sales are recorded.
 
 Advertising
 
 Currently
advertising is primarily done through our officers’ connections with
celebrities. Advertising costs, totalled $ 20,597 for the period January
1 st to April
30 th , 2005, $
28,192 and $ 2,505 in fiscal year 2004 and 2003, respectively and are included
in marketing expenses. Advertising costs are expensed when the advertising first
appears.
 
 Shipping
and handling
 
 Shipping
and handling costs when incurred (deliveries to independent corner shops) are
included in cost of goods sold.
 
 Income
taxes
 
 Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and tax
credit carry-forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
 
 Non-monetary
transactions
 
 The
accounting for non-monetary assets is based on the fair values of the assets
involved. Cost of a non-monetary asset acquired in exchange for another
non-monetary asset is recorded at the fair value of the asset surrendered to
obtain it. The difference in the costs of the assets exchanged is recognized as
a gain or loss. The fair value of the asset received is used to measure the cost
if it is more clearly evident than the fair value of asset
surrendered.
 
 Basic
and diluted earnings per share
 
 Basic
earnings (loss) per share (“EPS”) is computed based on the weighted average
number of common shares outstanding for the period. Diluted EPS gives effect to
all dilutive potential shares outstanding (i.e., options and warrants) during
the period.
  -7-
  
 OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 
 **NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES(Continued)**
 
 New
accounting standards
 
 **New
Accounting Pronouncements**
 
 In
December 2004, the FASB issued SFAS No.123 (revised 2004), “Share-Based Payment”
(“SFAS 123R”), which replaces SFAS No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”) and supersedes APB Opinion No. 25, “Accounting for
Stock Issued to Employees. “SFAS 123R requires that all share-based payments to
employees, including grants of employee stock options, be recognized in the
financial statements based on their fair values, beginning with the first
interim or annual period after June 15, 2005, with early adoption encouraged.
The pro forma disclosures previously permitted under SFAS 123, no longer will be
an alternative to financial statement recognition. We are required to adopt SFAS
123R in the third quarter of 2005. Under SFAS 123R, we must determine the
appropriate fair value model to be used in valuing share-based payments, the
amortization method for compensation cost and the transition method to be used
at the date of adoption. Upon adoption, we may choose from two transition
methods: the modified-prospective transition approach or the
modified-retroactive transition approach. Under the modified-prospective
transition approach we would be required to recognize compensation cost for
awards that were granted prior to, but not vested as of the date of adoption.
Prior periods remain unchanged and pro forma disclosures previously required by
SFAS No. 123 continue to be required. Under the modified-retrospective
transition method, we would be required to restate prior periods by recognizing
compensation cost in the amounts previously reported in the pro forma disclosure
under SFAS No. 123. Under this method,
 
 We would
be permitted to apply this presentation to all periods presented or to the start
of the fiscal year in which SFAS No. 123R is adopted. We would also be required
to follow the same guidelines as in the modified-prospective transition method
for awards granted subsequent to adoption and those that were granted and not
yet vested. We are currently evaluating the requirements of SFAS 123R and its
impact on our consolidated results of operations and earnings per share. We have
not yet determined the method of adoption or the effect of adopting SFAS 123R,
and it has not been determined whether the adoption will result in amounts
similar to the current pro forma disclosures under SFAS 123.
 
 In
December 2004, the FASB issued Staff Position (“FSP”) No.109-2, “Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004” (“FSP 109-2”). This position provides
guidance under FASB Statement No.109 (“SFAS 109”), “Accounting for Income
Taxes”, with respect to recording the potential impact of the repatriation
provisions of the American Jobs Creation Act of 2004 (the “Jobs Act”) on
enterprises’ income tax expense and deferred tax liability. The Jobs Act was
enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time
beyond the financial reporting period of enactment to evaluate the effect of the
Jobs Act on its plan for reinvestment or repatriation of foreign earnings for
purposes of applying SFAS 109.   The Company does not have accumulated
income earned abroad and The Act and the FSP No. 109-2 do not have any
effect on the Company’s financial statements.
 
 In
December 2004, the FASB issued SFAS No. 153, “Exchanges of Non monetary Assets -
An Amendment of APB Opinion No. 29, Accounting for Non monetary Transactions”
(“SFAS 153”). SFAS 153 eliminates the exception from fair value measurement for
non monetary exchanges of similar productive assets in paragraph 21(b) of APB
Opinion No. 29, “Accounting for Non monetary Transactions,” and replaces it with
an exception for exchanges that do not have commercial substance. SFAS 153
specifies that a non monetary exchange has commercial substance if the future
cash flows of the entity are expected to change significantly as a result of the
exchange. SFAS 153 is effective for fiscal periods beginning after June 15,
2005. We have considered SFAS 153 and have determined that this pronouncement is
not applicable to our current operations.
 
  -8-
  
 OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 **NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued)**
 
 **New
Accounting Pronouncements (Continued)**
 
 In
November 2004, the FASB issued SFAS No. 151, “Inventory Costs - An Amendment of
ARB Opinion No. 43, Chapter 4” (“SFAS 151”). SFAS 151 amends the guidance in ARB
No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). Among other provisions, the new rule requires that items such as
idle facility expense, excessive spoilage, double freight, and rehandling costs
be recognized as current period charges regardless of whether they meet the
criterion of “so abnormal” as stated in ARB No. 43. Additionally, SFAS 151
requires that the allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production facilities. SFAS
151 is effective for fiscal years beginning after June 15, 2005. We have
considered SFAS 151 and have determined that this pronouncement will not
materially impact our consolidated results of operations.
 
 In
November 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate
Time-Sharing Transactions - An amendment of SFAS No. 66 and 67”. This statement
amends SFAS No. 66, “Accounting for Sales of Real Estate, to reference the
financial accounting and reporting guidance for real estate time-sharing
transactions which is provided in AICPA Statement of Position (“SOP”) 04-2,
“Accounting for Real Estate Time-Sharing Transactions.” This statement also
amends SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real
Estate Projects,” to state the guidance for (a) incidental costs and (b) costs
incurred to sell real estate projects does not apply to real estate time-sharing
transactions. The accounting for those costs is subject to guidance in SOP 04-2.
SFAS 152 is effective for fiscal years beginning after June 15, 2005. We have
considered SFAS 152 and have determined that this pronouncement is not
applicable to our current operations.
 
 In
December 2003, the FASB issued a revision to Statement No. 132, Employers’
Disclosures about Pensions and Other Postretirement Benefits. This revision
requires additional disclosures by the Company regarding its plan assets,
investment strategies, plan obligations and cash flows. We have considered
revised statement 132 and have determined that at this time this pronouncement
is not applicable to our current operations.
 
 
 **Note
      4 - Fixed assets**
    
    April
      30,
    
    December
      31,2005
    
    2004
    
    2003(Unaudited)
    
    (Audited)
    
    (Audited)Leasehold
      improvement
    
    $
    398,813
    
    $
    407,289
    
    $
    154,116Furniture
      and equipment
    
    
    16,251
    
    
    17,208
    
    
    7,640Computer
      appliances
    
    
    36,847
    
    
    44,364
    
    
    31,836Total
      Property plant and equipment
    
    
    451,911
    
    
    468,861
    
    
    193,592Less:
      accumulated depreciation
    
    
    71,643
    
    
    52,050
    
    
    8,975Property
      plant and equipment (net)
    
    $
    380,268
    
    $
    416,811
    
    $
    184,617
 
 Depreciation
expenses for April 30 th 2005,
December 2004 and 2003 were $19,593, $43,075 and $8,975,
respectively.
 
 
 
 
 
 
  -9-
  OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 **Note
5 - Intangible assets**
 
 In
relation to the lease agreement for the shop and office space in Paris, we paid
$ 401,824 to the previous lease holder.
 
 **Note
6 - Credit lines with financial institutions**
 
 We have
secured and unsecured lines of credits with major banks in Switzerland and
France. As of the dates indicated the outstanding balances were:
 
 Country
    BankSecurity
    April
      30,
    December
      31,2005
    2004
    2003(Audited)
    (Audited)France
    Crédit
      Lyonnais
    263,753
    $207,115
    $236,274Switzerland
      *
    UBS
    70,889
    $70,889
    unused
 
 * Shows
on the balance sheet as part of other liabilities.
 
 **Note
7 - Income Taxes**
 
 Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.
 
 **NOTE
8 - LEASES**
 
 We have
operating leases for our shops and offices. We entered the leasing agreement for
the Paris store on July 4, 2003. The term of the lease is non cancellable for
nine years with a fix annual rent of $ 91,250 (Euro 74,862), automatically
renewable thereafter.
 
 In
Switzerland we have an operating lease for the store which started on September
1 st , 2004,
is non cancellable for 5 years and renewable thereafter for periods of 5 years.
The minimum rent is of $ 45,300 (CHF 56,000). Subject to annual escalation based
on Swiss consumer price index. The rent is also increased by 8% of
revenues.
 
 Since
inception of the Company, we have subleased our office’s space in Geneva. This
lease is cancellable by both parties with a 3 months notice.
 
 Future
minimum rental payments under non-cancellable operating leases are as
follows
 
 Fiscal
      year2005
    $
      178,0002006
    $
      184,0002007
    $
      191,0002008
    $
      196,0002009
    $
      208,000Thereafter
    $182,500Total
    $1,139,500
 
 The lease
payments were $ 59,533 for the period January 1 st to April
30 th , 2005, $
140,628 for 2004 and $ 79,889 for 2003 respectively.
  -10-
  
 OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 
 **NOTE
9 - COMMITMENTS AND CONTINGENCIES**
 
 
 **Pending
Business Combinations**
 On June
2, 2003, the holders of 61% of the issued and outstanding shares of the ORION
Diversified Technologies Inc, a publicly traded State of New Jersey company
approved the following resolutions. This Note also discusses subsequent events,
which are the results of the resolutons:
 
 1.
    Business
      Combination - To negotiate and consummate a reverse merger business
      combination with us wherein all our issued and outstanding shares will be
      exchanged against 5,900,000 authorized but unissued shares of ORION
      Diversified Technologies Inc;
 
 2.
    Prior
      to the business combination - Orion shall increase the number of its
      authorised shares of common stock, from 10,000,000 to 20,000,000 with a
      $.01 par value per share, to create an authorized class of 2,000,000
      shares of Preferred Stock, $.01 par value per share. The Board of
      Directors is authorized to designate the preferences of the preferred
      shares and issue such stock. The Board may change the name of the
      Registrant to Ovale, Inc. or such other name as the Board of Directors
      deems reasonable;
 
 3.
    Subsequently
      On September 15, 2004, OPion, and the holders of all of the outstanding
      capital stock (the "Holders") of Ovale S.A., a Swiss corporation
      ("Ovale"), entered into a Share Exchange Agreement(the "New Agreement")
      that amended, restated and replaced their prior agreements. Pursuant to
      the New Agreement, the Holders agreed to tender to Orion all of the 100
      issued and outstanding shares of Class A common stock, 1,000 CHF ($ 838)
      par value, and all 150 issued and outstanding shares of Class B common
      stock, 5,000 CHF ($ 4,187) par value, of Ovale in exchange for an
      aggregate of 10,608,100 shares of common stock of the
      Registrant.
 
 In
addition, certain Class A Shareholders of Ovale who borrowed CHF 50,000 ($
36,000) from Orion in June, 2003 (the "June Borrowers") and Vladimir Fabert,
Ovale's President and principal stockholder ("Fabert") who arranged for a loan
to be made to Ovale for a maximum of (euro) 700,000 ($840,000) (the
"Fabert-Ovale Loan") agreed that at the closing: (i) Fabert shall accept 1.667
shares of the Orion's common stock for each Euro lent to Ovale by Orion as
payment of the Fabert-Ovale Loan; and (ii) the June Borrowers shall accept
CHF50,000 ($ 36,000) as additional payment for their Class A Ovale shares in
full satisfaction of their loan. The foregoing is hereinafter referred to as the
("Share Exchange"). As a result, and at the closing of the Share Exchange, Ovale
will become a wholly owned subsidiary of the Registrant, and the Holders will
collectively own approximately 75% of the total number of shares of the
Registrant's common stock expected to be issued and outstanding as of that date.
The transaction with the Holders is being accounted for as a reverse
acquisition. The Agreement, which contains the customary representations and
warranties, requires Ovale to furnish Orion with audited financial statements.
Following the closing of the Share Exchange with Ovale, of which there can be no
assurance: (i) Messrs. Vladimir Fabert and Gilles Neveau will be elected as the
Registrant's principal executive officers and as members of the Registrant's
Board of Directors; (ii) the Registrant will elect a Chief Financial Officer;
(iii) Irwin Pearl will remain as a member of the Registrant's Board of
Directors; and (iv) the Registrant will become principally engaged in the design
and distribution of high quality infant clothing, gifts and accessories.
 
 On
November 8, 2004, the Registrant, Ovale and the Holders entered into an
amendment (the "Amendment") to the New Agreement. Pursuant to the Amendment, the
parties agreed to consummate the business combination in two closings. At the
first closing, the Registrant was to cause the original issuance and delivery to
a designated Swiss escrow agent of an aggregate of 5,900,000 shares of its
common stock, $.01 par value per share. Those shares were to be held in escrow
until the completion of all but three of the conditions precedent to closing
enumerated in the New Agreement have been satisfied. 2,064,100 Orion shares were
released to Ovale shareholders and 1,166,900 shares were exchanged by
 
  -11-
  
 OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 **NOTE
9 - COMMITMENTS AND CONTINGENCIES (Continued)**
 
 Vladimir
Fabert for a Ovale note he held for $543,770 pursuant to Orion's agreement. The
conditions to the first closing having been met, that closing took place in
November, 2004. The three conditions to the second closing are: the delivery of
the Ovale financial statements required by the New Agreement, the authorization
from Orion’s shareholders to amend its charter and the filing of an appropriate
amendment to Orion’s Certificate of Incorporation. At the second closing, the
Registrant will, deliver the remaining 5,875,000 shares of its common stock,
$.01 par value per share to the individual Ovale shareholders in exchange for
all of the Ovale shares being held in escrow by the Swiss escrow agent. Finally,
the Amendment provided that Orion’s current Board of Directors shall remain
intact until the second closing.
 
 4.
    Private
      Offerings - A private placement under Regulation S under the Securities
      Act of 1933, as amended (the "Act") of up to an aggregate of 1,000,000
      authorized but unissued shares of Orion’s common stock at $1.50 per share,
      which shares shall be restricted securities as that term is defined under
      the Act. A second private offering under Regulation S and/or Rule 506 of
      Regulation D under the Act of up to an aggregate of 250,000 authorized but
      unissued shares of the Registrant's common stock at $1.50 per share, which
      shares shall be restricted securities as that term is defined under the
      Act;
 
 5.
    Stock
      Option Plan - The adoption of a 2003 Long Term Incentive Plan wherein an
      aggregate of 2,000,000 authorized but unissued shares of Orion’s common
      stock are reserved for issuance of option under the plan; no options have
      been granted under this plan.
 
 6.
    Election
      of Directors - Granting to the existing Board of Directors the authority
      to elect Vladimir Fabert and Gilles Neveau, the two principal executive
      officers of Ovale, as Directors of Orion; this proposal was dealt with in
      the amendment to the Agreement dated November 8, 2004 and accordingly,
      Messrs. Fabert and Neveau have not been elected to the board of
      Orion.
 
 
 **NOTE
10 - COMPENSATION PLANS**
 
 In
Switzerland, the company has a defined contribution plan where contributions are
made on an equal basis by the employee and the employer. The total contribution
varies between 7% and 18 %, based on the age of the employee, of a set salary,
which as at the end of 2004 was $ 44,000. The charge for compensation plan for
the period January 1 st to April
30 th 2005 was
$5,270 (2004 $ 2,215; 2003 $ 1,750). In Switzerland, we provide accident
insurance but not health or any post retirement benefits. In line with Swiss
business customs, we offer our employees up to one month of paid sick leave.
 
 In
France, no compensation plans are mandatory, but the Company is required to
accrue 1% to 2% of personnel costs to be used in social activities.
 
 Vacation
time is accrued during the period and must be taken during the period or within
a maximum time frame in the following period. There is no cumulative sick day or
vacation day.
 
 
 **NOTE
11 - COMMON STOCK**
 
 We have a
share capital of CHF 850,000 ($ 687,310) composed of: 100
registered under the names of private shareholders with a par value of CHF 1,000
each (approximately $ 838) and 150 bearer shares with a par value of CHF 5,000
each (approximately $ 4,187). Currently the majority of all shares are owned by
the principal shareholder of OVALE (Suisse) SA the parent company.
 
  -12-
  
 OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 **NOTE
11 - COMMON STOCK (Continued)**
 
 Vladimir
Fabert holds directly or in trust 100% of the share capital of Ovale SA
 
 The
French subsidiary has total shares of 500 with a par value of $ 18. Out of these
shares, 499 are owned by Ovale SA and one share by the principal
shareholder.
 
 
 **NOTE
12 - SEGMENT INFORMATION**
 
 The
Company operates in two different countries with separate shops, sales,
accounting and administrative teams.
 
 France
    Switzerland
    Total2004
    2003
    2004
    2003
    2004
    2003Net
      sales
    390,875
    36,503
    28,380
    0
    419,255
    36,503Long-lived
      assets-net
    220,177
    179,765
    196,634
    4,852
    416,811
    184,617
 
 For the
period January to April 2005, sales in France were $104,964 and in Switzerland
were $64,284. There were no changes in long-lived assets.
 
 **NOTE
13 - TAXES AND NET OPERATING LOSS CARRY FORWARDS**
 
 As of
December 31, 2004, the components of deferred tax assets were as follows:
 Deferred
tax assets:
 
 Ovale had
net operating losses (NOLs) of $1,329,733 at December 31, 2004. These NOLs and
corresponding estimated tax assets, computed at a 30% tax rate, expire as
follows:
 
 Year
      loss
    Expiration
    Loss
    EstimatedIncurred
    Date
    Amount
    Tax
      Asset2003
    2010
    $
      523,730
    $
      157,0002004
    2011
    806,003
    242,000Total
    
    $1,329,733
    $399,000Less:
      Valuation allowance
    
    
    (399,000)Tax
      asset net
    
    
    $--
 Under the
provisions of SFAS 109, NOLs represent temporary differences that enter into the
calculation of deferred tax assets. Realization of deferred tax assets
associated with the NOL is dependent upon generating sufficient taxable income
prior to their expiration.
 
 Management
believes that there is a risk that certain of these NOLs may expire unused and,
accordingly, has established a valuation allowance against them. Although
realization is not assured for the remaining deferred tax assets, based on the
historical trend in sales and profitability, sales backlog, and budgeted sales
of the Company and its consolidated
 
 
 
 
  -13-
  OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 
 **NOTE
13 - TAXES AND NET OPERATING LOSS CARRY FORWARDS
(CONTINUED)**
 
 subsidiary,
management believes it is likely that they may not be totally realized through
future taxable earnings. In addition, the net deferred tax assets could be
reduced in the near term if management's estimates of taxable income during the
carryforward period are significantly reduced.
 
 A
reconciliation of the statutory tax rate to Ovale’s effective tax rate is as
follows:
 Tax
      at statutory rate
    32.0%Tax
      benefit of loss carry forward
    (32%)Effective
      tax rate
    -0-%
 
 
 **NOTE
14 - RELATED PARTY TRANSACTIONS**
 
 **Employment
agreement with CEO**
 
 We
entered a contract with our CEO in January 2003 for an annual salary of CHF
180,000 ($ 129,500). Subsequently the contract was amended as of January 1,
2004, and the new salary adjusted to CHF 240,000 ($ 187,000), for the following
years.
 
 Even
though the contract has not been amended, our CEO decided to temporarily reduce
his salary as of January 1, 2004 to CHF 90,000.-- ($65,000.--) to be paid until
such time that the development stage of the
 company
is completed.
 
 When the
Board of Directors our CEO will consider that the development stage of the
company is completed, he will be entitled at any time to readjust his annual
salary to CHF 240,000.-- ($ 186,901.--) in addition to the payment of the unpaid
salaries.
 
 The
unpaid balance of salaries was $ 44,470.--, as at December 31, 2004, $
69,950.--, as at December 31, 2003 respectively."
 
 **Loan
from principal shareholder**
 
 The
principal shareholder has advanced funds to the Company to the amount of $
1,719,889 at April 30, 2005, $ 1,386,591 at December 31, 2004 and $361,768 at
December 31, 2003. The amounts are used as working capital. These amounts are
payable on demand and bear no interest. As part of the arrangement with Orion
the principal shareholder exchanged 543,770 in notes receivable from Ovale for
1,166,900 shares of Orion.
 
 **NOTE
15 - PRIVATE OFFERING**
 
 There
were no private offerings of Ovale SA shares, or conversions of loans into Ovale
SA shares. On the other hand as described in note 9 loans made by shareholders
of Ovale SA to Ovale SA were acquired by Orion through the issuance of Orion
shares .
 
 
 
 
 
  -14-
  
 OVALE
S.A.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 
 **NOTE
16 - GOING CONCERN BASIS AND FUTURE PLANS**
 
 The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business.
 
 
 We are a
development stage company with limited operations, no substantial continuing
source of revenues, and working capital and stockholders' deficits. Present
operations require substantial capital and until revenues are sufficient to fund
ongoing operations, we are highly dependent on owner financing. We have planned
to merge with a public company and avail ourselves the opportunity to find a
suitable investors to implement and expand our plans internationally. Our
primary sources of liquidity has been loans from the owner and related parties.
These conditions raise substantial doubt about its ability to continue as a
going concern.
 
 **NOTE
17 - SUBSEQUENT EVENTS**
 
 No
material evolution of operations and no special events as at June 30,
2005
 Between
January 1, 2005 and June 30, 2005, Shareholders of Ovale SA made shareholders
loans to Ovale SA for an aggregate amount of € 350,000 ($ 450,000). It is
expected, and the creditors have agreed, that these loans would be acquired by
Orion following the completion of the merger and subject to the approval of
Orion’s board of Directors. The expected acquisition of the loans would be based
on the creditors accepting 1.08 common shares of Orion for each Euro lent to
Ovale SA by the creditors.