UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 9, 1996
Orion Acquisition Corp. II
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(Exact name of registrant as specified in its charter)
Delaware 000-20837 13-3863260
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1430 Broadway, 13th Floor, New York, New York 10018
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(Address of principal executive offices) (Zip Code)
(212) 391-1392
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
The following are the balance sheets of Orion Acquisition Corp. II (the
"Company"), at March 11, 1996 and July 9, 1996, audited by the Company's
accountants, BDO Seidman, LLP. The Company closed its initial public offering of
800,000 Units, consisting of 800,000 shares of Common Stock and 800,000
Redeemable Class A Common Stock Purchase Warrants, and 320,000 Redeemable Class
B Unit Purchase Warrants on July 9, 1996.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Orion Acquisition Corp. II
New York, New York
We have audited the accompanying balance sheets of Orion Acquisition Corp.
II (a corporation in the development stage) as of March 11, 1996 and July 9,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the balance sheets referred to above present fairly, in
all material respects, the financial position of Orion Acquisition Corp. II as
of March 11, 1996, and July 9, 1996 in conformity with generally accepted
accounting principles.
New York, New York BDO Seidman, LLP
July 9, 1996
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Balance Sheets
<TABLE>
Assets March 11, 1996 July 9, 1996
<S> <C> <C>
Cash $ 115,283 $ 664,405
Cash in escrow (Note 1) 8,000,000
Deferred registration costs (Note 3) 135,522
Deferred financing costs (Note 3) 14,554
Total assets $ 265,359 $ 8,664,405
Liabilities and Stockholders' Equity
Accrued expenses $ 152,183 $ 114,000
Notes payable (Note 5) 65,184
Total liabilities 217,367 114,000
Commitment (Note 4)
Common stock subject to possible conversion,
159,920 shares at redemption value (Note 1) 1,599,200
Stockholders' Equity:
Convertible preferred stock, $.01 par value,
shares authorized 200 and 1,000,000;
110 shares issued and outstanding (Note 1) 1 1
Subscription receivable (Note 5) (11,000)
Common stock, $.01 par value, 200,000 and 10,000,000
shares authorized; 90,000 and 890,000 shares issued
and outstanding (which includes 159,920 shares subject
to possible redemption) (Note 1) 900 8,900
Additional paid-in capital 62,599 6,998,185
Accumulated deficit during the development stage (4,508) (55,881)
Total stockholders' equity 47,992 6,951,205
Total liabilities and stockholders' equity $ 265,359 $ 8,664,405
See accompanying notes to balance sheets.
</TABLE>
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Notes to Balance Sheets
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1. Organization and Business Operations
The Company was incorporated in Delaware on October 19, 1995 for the
purpose of raising capital to fund the acquisition of an unspecified operating
business. All activity to date relates to the Company's formation and fund
raising. The Company has selected December 31, as its fiscal year end.
The registration statement for the Company's Initial Public Offering (the
"Offering") became effective on July 2, 1996. The Company consummated the
Offering on July 9, 1996 and raised net proceeds of $8,891,293 (see Note 2). The
Company's management has broad discretion with respect to the specific
application of the net proceeds of the Offering, although substantially all of
the net proceeds of the Offering are intended to be generally applied toward
consummating a business combination with an operating business ("Business
Combination"). Furthermore, there is no assurance that the Company will be able
to successfully effect a Business Combination. An aggregate of $8,000,000 of the
net proceeds will be held in an escrow account which will be invested until
released in short-term United States Government Securities, including treasury
bills and cash and cash equivalents ("Proceeds Escrow Account"), subject to
release at the earlier of (i) consummation of its first Business Combination or
(ii) liquidation of the Company (see below). The remaining proceeds will be used
to pay for business, legal and accounting, due diligence on prospective
acquisitions, costs relating to the Offering and continuing general and
administrative expenses in addition to other expenses.
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the acquisition is such as would not ordinarily require
stockholder approval under applicable state law. All of the Company's original
stockholders, including all directors and the Company's executive officers, have
agreed to vote their respective shares of common stock in accordance with the
vote of the majority of the shares voted by all other stockholders of the
Company ("non-affiliated public stockholders") with respect to any such Business
Combination. A Business Combination will not be consummated unless approved by a
vote of two-thirds of the shares of common stock owned by non-affiliated public
stockholders.
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer ("Redemption Offer") each of the
non-affiliated public stockholders of the Company the right, for a specified
period of time not less than 20 calendar days, to redeem his shares of common
stock. The per share redemption price ("Liquidation Value") will also be
determined by dividing the greater of (i) the Company's net worth or (ii) the
amount of assets of the Company in the escrow account including all interest
earned thereon by the number of shares held by such non-affiliated public
stockholders. In connection with the Redemption Offer, if non-affiliated public
stockholders holding less than 20% of the common stock elect to redeem their
shares, the Company may, but will not be required to, proceed. The Company will
redeem such shares by applying the Liquidation Value to the number of shares to
be redeemed. In any case, if non-affiliated public stockholders holding 20% or
more of the common stock elect to redeem their shares, the Company will not
proceed with such potential Business Combination and will not redeem such
shares. Accordingly, a portion of the net proceeds from the Offering (19.99% of
the amount held in the Trust Fund) has been classified as common stock subject
to possible redemption in the accompanying balance sheet at the estimated
redemption value.
All shares of the common stock outstanding immediately prior to the date of
the Offering have been placed in escrow until the earlier of (i) the occurrence
of the first Business Combination, (ii) 18-months from the effective date of the
Offering or (iii) 24-months from the effective date of the Offering if prior to
the expiration of such 18-month period the Company has become a party to a
letter of intent or a definitive agreement to effect a Business Combination, in
which case such period, shall be extended six months. During the escrow period,
the holders of escrowed shares of common stock will not be able to sell or
otherwise transfer their respective shares of common stock (with certain
exceptions), but will retain all other rights as stockholders of the Company,
including without limitation, the right to vote escrowed shares in accordance
with a vote of a majority of the shares voted by non-affiliated public
stockholders with respect to a Business Combination or liquidation proposal.
If the Company does not effect a Business Combination within 18-months from
the effective date or 24-months from the effective date if the extension
criteria have been satisfied, the Company will submit for stockholder
consideration a proposal to liquidate the Company and , if approved, distribute
to the then holders of common stock (issued in the Offering or acquired in the
open market thereafter) all assets remaining available for distribution after
payment of liabilities and after having made appropriate provisions for the
payment of liquidating distributions upon each class of stock, if any, having
preference over the common stock.
2. Public Offering
On July 9, 1996 the Company sold 800,000 units ("Units") in the Offering
and 320,000 Class B redeemable common stock purchase warrants ("Class B
Warrant"). Each Unit consists of one share of the Company's common stock and one
Class A redeemable common stock purchase warrant ("Class A Warrant"). Each Class
A Warrant entitles the holder to purchase from the Company one share of common
stock at an exercise price of $9.00 commencing on the date of a Business
Combination and expiring on the fifth anniversary from such date, and each Class
B Warrant entitles the holder to purchase one Unit at an exercise price of
$0.125 commencing on the date of a Business Combination and expiring on the
first anniversary from such date. The Class A Warrants and Class B Warrants are
redeemable, each as a class, in whole and not in part, at a price of $.05 per
warrant upon 30 days notice at any time provided that the Company has
consummated a Business Combination and the last sale price of the common stock
on all ten trading days ending on the day immediately prior to the day on which
the Company gives notice of redemption, has been $11.00 or higher.
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3. Summary of Significant Accounting Policies
Deferred Registration Costs
Registration costs represent primarily professional fees and a license fee
relating to the Offering. In January 1996, the Company entered into a license
agreement with Bright Licensing Corp. for the right to use certain service marks
for the sole purpose of marketing such Offering at a cost of $100,000 which was
included with deferred registration costs. The license fee was payable in
installments of $10,000 upon its execution and $90,000 at the earlier of
eighteen months from the date of its execution or the consummation of the
Offering. As a result of the consummation of the Offering on July 9, 1996, all
deferred registration costs were charged to stockholders' equity.
Deferred Financing Costs
Net unamortized costs incurred in connection with the private placement of
unsecured promissory notes (see Note 5) totaling $15,750 were being amortized
over eighteen months using the straight-line method. As of July 9, 1996, the
unsecured promissory notes were completely satisfied as a result of the
consummation of the Offering, at which point the balance of unamortized
financing costs were amortized against interest expense.
Income Taxes
The Company follows the Financial Accounting Standards Board ("FASB")
Statement No. 109. This statement requires that deferred income taxes be
recorded following the liability method of accounting and be adjusted
periodically when income tax rates change.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments
The Company will follow Statement of Financial Accounting Standards No. 115
("SFAS 115"), "Accounting for Certain Investments in Debt and Equity
Securities".
Fair Value of Financial Instruments
The carrying values of financial instruments including cash in escrow,
accrued expenses and notes payable approximate fair value at March 11, 1996 and
July 9, 1996 because of the relatively short maturities of these instruments.
4. Commitments
The Company has entered into an oral agreement with Mentmore Holdings
Corporation, a Delaware corporation which is affiliated with Richard L. Kramer
and William L. Remley, to lease office space and to be provided with secretarial
and office services commencing upon the closing of this Offering. The Company
will pay $2,500 per month to Mentmore for their provision of such services.
5. Stockholders' Equity
(a) Private Placement
In January 1996, the Company completed a private offering to a limited
group of investors which consisted, in aggregate, of $100,000 in unsecured
promissory notes bearing interest at 8% per annum. The notes were repaid on the
consummation of the Company's Offering together with accrued interest totaling
$3,533. In addition, the Company also issued to the private placement investors
15,000 shares of common stock for $7,500. The notes were discounted $37,500 for
financial statement reporting purposes as a result of the fair value attributed
to the common stock issued to the private placement shareholders. The effective
rate on the notes was approximately 45%.
(b) Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with
such designations, voting and other rights and preferences as may be determined
from time to time by the Board of Directors.
The Company has outstanding 110 shares of Series A preferred stock which is
owned by CDIJ Capital Partners, L.P., an indirect affiliate of Bright Licensing
Corp. The purchase price for such shares was $11,000 in the aggregate, which was
paid simultaneously with the consummation of the Offering. The Series A
preferred stock are non-voting and are each convertible into 1,000 shares of
common stock for a period of one year following the consummation of a Business
Combination. In the event that a Business Combination does not occur within
18-months from the effective date, or 24-months from the effective date if the
extension criteria are satisfied, the Series A preferred stock will be redeemed
by the Company at its original cost basis.
(c) Common Stock
On July 9, 1996, 2,310,000 shares of common stock were reserved for
issuance upon exercise of redeemable warrants and underwriter's warrants.
(d) Options
The Company has granted options to purchase 100,000 Units to Cranbrooke
Corporation, a Delaware corporation which is affiliated with two officers of the
Company. The option is exercisable for a period of three years from the date of
a Business Combination at an exercise price of $12.50 per Unit. The option is
fully vested; however, the options will be canceled if Mr. Kramer and Mr. Remley
cease to serve as directors or executive officers of the Company prior to the
Business Combination. The shares issuable upon exercise of the options and
underlying warrants may not be sold or otherwise transferred for 120 days
subsequent to the first Business Combination.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Orion Acquisition Corp. II
(Registrant)
Dated: July 12, 1996 /s/ William L. Remley
William L. Remley
President and Treasurer
