SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 1996
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 000-20837
Orion Acquisition Corp. II
(Exact name of registrant as specified in its charter)
Delaware 13-3863260
(State of Incorporation) (I.R.S. Employer Identification No.)
1430 Broadway, 13th Floor
New York, New York 10018 10018
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (212)391-1392
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No ___
As of October 31, 1996, 890,000 shares of Common Stock were issued and
outstanding.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1: Financial Statements
ORION ACQUISITION CORP. II
(A Corporation in the Development Stage)
STATEMENTS OF OPERATIONS
(Unaudited)
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<S> <C> <C> <C>
Period From
Inception
(October 19, 1995)
Three Months Ended Nine Months Ended through
September 30, September 30, September 30,
1996 1996 1996
Interest income $ 100,770 $ 102,584 $ 102,584
Interest expense -- (57,694) (57,694)
Operating expense (35,913) (35,913) (35,913)
_____________ ____________ _____________
Income before income taxes 64,857 8,977 8,977
Income taxes (2,500) (2,500) (2,500)
_____________ ____________ ______________
Net income $ 62,357 $ 6,477 $ 6,477
_____________ ___________ ______________
Primary and fully-diluted earnings
per share $ .05 $ .09
____________ ____________
Weighted average common and common
equivalent shares outstanding 2,422,000 799,000
See Notes to Unaudited Financial Statements
</TABLE>
<PAGE>
ORION ACQUISITION CORP. II
(A Corporation in the Development Stage)
BALANCE SHEET
(Unaudited)
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<S> <C>
September 30,
1996
ASSETS
Cash $ 672,262
Restricted cash 9,324
US Treasury Bonds - restricted 7,998,644
Accrued investment interest receivable 90,980
______________
Total assets $ 8,771,210
______________
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses $ 23,328
Common stock subject to possible conversion
159,920 shares at redemption value, 1,600,793
Stockholders' equity:
Convertible preferred stock, $.01 par value,
1,000,000 shares authorized:
110 shares issued and outstanding 1
Common stock, $.01 par value, 10,000,000
shares authorized; 890,000 shares issued and
outstanding (which includes shares subject
to possible redemption) 8,900
Additional paid-in capital 7,133,304
Retained earnings 4,884
_____________
Total stockholders' equity 7,147,089
_____________
Total liabilities and stockholders' equity $ 8,771,210
_____________
See Notes to Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
ORION ACQUISITION CORP. II
(A Corporation in the Development Stage)
STATEMENTS OF CASH FLOWS
(Unaudited)
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<S> <C> <C>
Period From
Inception
(October 19, 1995)
Nine Months Ended through
September 30, September 30,
1996 1996
Cash flows from operating activities:
Net income $ 6,477 $ 6,477
Changes in working capital:
Increase in accrued investment
receivables (90,980) (90,980)
Increase (decrease) in accounts
payable and accrued expenses 23,328 23,328
_________________ __________________
Cash used in operating activities (61,175) (61,175)
_________________ __________________
Cash flows from investing activities:
Purchase of U.S. Treasury Bonds and
other increases in restricted cash (8,007,968) (8,007,968)
_________________ ___________________
Cash flows from financing activities:
Issue of Units and Redeemable Class B
Purchase Warrants, net of
underwriting discounts 9,330,738 9,330,738
Public offering expenses (589,333) (589,333)
_________________ ___________________
Cash provided by financing activities 8,741,405 8,741,405
_________________ ___________________
Net increase in cash 672,262 672,262
Cash at beginning of period -- --
_________________ __________________
Cash at end of Period $ 672,262 $ 672,262
_________________ __________________
See Notes to Unaudited Financial Statements
</TABLE>
<PAGE>
ORION ACQUISITION CORP. II
(A Corporation in the Development Stage)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with instructions to Form 10-Q and do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation which were of a normal and recurring nature
have been included. The results of operations for any interim period are not
necessarily indicative of the results for the year. These unaudited financial
statements should be read in conjunction with Form 8-K filed with the Securities
and Exchange Commission on July 12, 1996.
2. Organization and Business Operations
Orion Acquisition Corp. II (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 3). 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 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.
3. 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"). Subsequently, on August 5, 1996, the underwriters exercised their
overallotment option to purchase 48,000 Class B Warrants. 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.
<PAGE>
4. Investments
A substantial portion of the assets of the Company are invested in U.S.
Treasury Bonds having maturities up to one year. Aggregate market value of these
securities as of September 30, 1996, totaled approximately $7,899,000. These
securities, in addition to the restricted cash as shown on the balance sheet,
are held in an escrow account with a bank. The ultimate use of these funds are
restricted as described in Note 2.
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) 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.
6. Commitments
On September 6, 1996, the Company entered into an agreement with Ladenburg,
Thalmann & Co., Inc. ("Ladenburg") to assist the Company as its exclusive
financial advisor in connection with its acquisition targeting activities. The
Company will pay the monthly sum of $3,500 to Ladenburg as a retainer for these
services through the life of this agreement which expires on January 8, 1998.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company has commenced activities associated with performing due
diligence and structuring activities on potential acquisition target companies.
However, the Company has been unsuccessful thus far in locating a viable
transaction for shareholder approval. Results for the period to September 30,
1996, consisted of investment income earned from Treasury bonds held in escrow
less expenses associated with general and administrative overheads and due
diligence activities.
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to a Vote of Security Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27: Financial Data Schedule for the
Quarterly Form 10-Q
(b) Reports on Form 8-K: Referenced to filing of Form 8-K dated
as of July 12, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORION ACQUISITION CORP. II
Dated: November 14, 1996 By: /s/William L. Remley
William L. Remley
President & Treasurer
<PAGE>
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<RECEIVABLES> 90980
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