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: June 30, 1999
_ 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) (IRS Employer Identification No.)
100 Wilshire Blvd., 17th Floor
Los Angeles, California 90401
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (310) 917-5656
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 ___
As of August 1, 1999, 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)
October 19,
Three Months Six Months 1995
Ended Ended (inception)
June 30, June 30, through
June 30,
1999 1998 1999 1999
---- ---- ---- ----
Interest income ........... $ 103,297 $ 109,528 $ 194,347 $1,328,195
Operating expense ......... (6,758) (28,117) (22,369) (591,610)
Stock-based compensation
expense .................. -- -- -- (100,000)
Interest expense .......... -- -- -- (57,694)
--------- --------- --------- ---------
Income (loss) before
income taxes ............. 96,539 81,411 171,978 578,891
Provision for income)
taxes ................... (51,268) (17,403) (86,859) (306,338)
--------- --------- --------- ---------
Net income (loss) ......... $ 45,271 $ 64,008 $ 85,119 $ 272,553
========= ========= ========= =========
Earnings per share:
Basic .................. $ 0.05 $ 0.07 $ 0.09
========= ========= =========
Diluted ................ $ 0.05 $ 0.07 $ 0.09
========= ========= =========
Weighted average common shares outstanding:
Basic .................. 890,000 890,000 890,000
======== ======== ========
Diluted ................ 890,000 890,000 890,000
======== ======== ========
See notes to accompanying unaudited financial statements
2
<PAGE>
ORION ACQUISITION CORP. II
(a corporation in the development stage)
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1999 1998
ASSETS
Cash $ 10,137 $ 11,902
Restricted cash 194,281 190,383
US Treasury bills - restricted 9,088,587 8,898,239
Accrued investment interest receivable - -
Deferred acquisition costs - -
---------- ----------
Total assets $ 9,293,005 $ 9,100,524
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses $ 169,047 $ 71,685
Due to Affiliate 10,000 -
Common stock, subject to possible conversion of
160,000 shares at redemption value 1,856,573 1,817,724
Commitments and contingencies - -
Stockholders' equity:
Convertible preferred stock, $.01 par value,
1,000,000 shares authorized: 1 1
110 shares issued and outstanding
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 8,900
Additional paid-in capital 7,232,504 7,232,504
Earnings accumulated during development
stage 15,980 (30,290)
---------- ---------
Total stockholders' equity 7,257,385 7,211,115
--------- ---------
Total liabilities and stockholders' equity $ 9,293,005 $ 9,100,524
=========== ===========
See notes to accompanying unaudited financial statements
3
<PAGE>
ORION ACQUISITION CORP. II
(a corporation in the development stage)
STATEMENTS OF CASH FLOWS
Six Months October
Ended 19, 1995
Three Months Ended June 30, (inception)
June 30, through
June 30,
1999 1998 1999 1999
---- ---- ---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 45,271 $ 64,008 $ 85,119 $ 272,553
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Note discount amortization - - - 37,500
Stock based compensation expense - - - 100,000
Changes in working capital:
Decrease (increase) in accrued
investment receivables - 43,946 - -
Decrease in prepaids and other - - - -
(Decrease) increase in accrued
expenses 52,211 (73,633) 97,362 169,047
--------- -------- --------- ---------
Cash provided by operating
activities 97,482 34,321 182,481 579,100
-------- -------- -------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of U.S. Treasury
bills and other increases
in restricted cash (103,296) (150,981) (194,246) (9,282,868)
(Increase) decrease in deferred
acquisition costs - (845) - -
--------- -------- -------- ---------
Cash used by investing
activities (103,296) (151,826) (194,246) (9,282,868)
--------- --------- --------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of units and
redeemable Class B purchase
warrants, net - - - 8,677,905
Issuance of unsecured
promissory notes - - - 100,000
Repayment of unsecured
promissory notes - - - (100,000)
Due to Affiliate 10,000 - 10,000 -
Issuance of founders' shares - - - 7,500
Issuance of private placement
shares - - - 7,500
Issuance of convertible
preferred stock - - - 11,000
-------- -------- -------- ---------
Cash provided by financing
activities 10,000 - - 8,713,905
-------- -------- -------- ---------
NET (DECREASE) INCREASE IN CASH 4,186 (117,505) (1,765) 10,137
Cash at beginning of period 5,951 231,895 11,902 -
-------- -------- -------- ---------
Cash at end of period $10,137 $114,390 $10,137 $ 10,137
======== ======== ======== =========
See notes to accompanying unaudited financial statements.
4
<PAGE>
ORION ACQUISITION CORP. II
(a corporation in the development stage)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with instructions to Form 10-QSB 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 the financial statements and
related notes included on Form 10-KSB for the year ended December 31, 1998 and
period October 19, 1995 (Date of inception) to December 31, 1998.
NOTE 2. INVESTMENTS
On May 20, 1999 U.S. Treasury Bills with a cost basis of $8,946,996
matured. The proceeds of $9,042,000 are included under restricted cash on the
balance sheet and are held in an escrow account with a bank. On May 20, 1999
U.S. Treasury Bills having maturities in August of 1999 were purchased at a cost
of $9,041,720 and a maturity value of $9,144,000.
5
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On April 30, 1999, a group of stockholders owning 453,825 shares of Common
Stock of Orion Acquisition Corp. II representing 50.99% of the outstanding
common stock took action by written consent to remove the then directors and
elect an entirely new board of directors. Immediately thereafter, new officers
of Orion were elected by unanimous consent of the new board of directors.
On July 15, 1999 the Company declared a $9.00 cash distribution per
share of common stock from the escrow account established in connection with its
public offering consummated in 1996. The distribution was paid July 26, 1999 to
only those holders of shares of common stock sold in the public offering as of
July 22, 1999.
After giving effect to the cash distribution, the Company has
$2,092,719 in cash, and $179,047 in liabilities including unpaid taxes and
accrued expenses.
The Company intends to file a proxy statement and call a special
meeting of the shareholders to vote on two proposals. The Company will submit a
proposal to approve the final liquidation of escrow funds to the company held at
Chase Manhattan Bank N.A. to fund the ongoing operations and payment of
outstanding liabilities of the Company. The Company will also submit a proposal
to change the provisions in the Company's Certificate of Incorporation to
eliminate the requirement that a vote of two-thirds of the outstanding shares of
the Company are required to approve a business combination, merger,
consolidation or acquisition of assets.
It is management's intention to continue to operate the Company with
a view to entering into a merger or business combination or to satisfy the
outstanding obligations and distribute any remaining cash, if any, to the
shareholders eligible to receive any further distributions. The Company
anticipates that it will require financing to consummate a business
combination. Currently it does not have any arrangements for financing, because
it is likely that the availability of funds will depend on the nature of the
transaction.
Results for the three and six month periods through June 30, 1999 and
1998, respectively, consisted of investment income earned from Treasury Bonds
held in escrow less expenses associated with general and administrative
overheads and due diligence activities.
On May 5, 1999 and July 20, 1999, MDB Capital Group LLC lent to the
Company the aggregate principal sum of $35,000. These loans are represented by
unsecured promissory notes due on demand, bearing interest at the annual rate
of 7% payable when the notes are paid. The proceeds of these loans
have been used for working capital. Each of Christopher A. Marlett, Anthony
DiGiandomenico, James D. Bowyer and Dyana Williams Marlett are officers and/or
directors of the Company and principals and/or employees of MDB Capital Group
LLC.
6
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
On July 1, 1999 a complaint was filed in the United States District Court
for the Southern District of New York (Case No. 99Civ.4782SHS) against Orion
Acquisition Corp. II, Mentmore Holdings Corporation and Mentmore Holdings, Inc.
and Messrs. Kramer, Remley, Hoffman, Frankel and Chess. The suit seeks damages
and equitable relief for violations of Section 12(2) of the Securities Act of
1933, and Rule 419 relating to offerings of blank check companies; Section 10(b)
of the Securities and Exchange Act of 1934 and SEC Rule 10b-5 promulgated
thereunder; Section 7,8(a) and 36 (a) of the Investment Company Act of 1940; and
for damages pursuant to certain pendent state law claims.
The plaintiff in the suit is a record holder of 132,600 Redeemable
Class B Warrants and a record holder of 1,400 shares of Common Stock. The
Company sought and was granted an extension to answer the claim until September
4, 1999. The Company believes it has meritorious defenses and will pursue the
defense of this litigation vigorously.
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-QSB
(b) Reports on Form 8-K:
None.
7
<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
By: /s/Anthony DiGiandomenico
Dated: August 13, 1999 -------------------------
Anthony DiGiandomenico
Chief Financial Officer
8
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<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 10,137
<SECURITIES> 9,282,868
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,293,005
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,293,005
<CURRENT-LIABILITIES> 2,035,620
<BONDS> 0
<COMMON> 8,900
0
1
<OTHER-SE> 7,232,773
<TOTAL-LIABILITY-AND-EQUITY> 9,293,005
<SALES> 0
<TOTAL-REVENUES> 103,297
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 96,539
<INCOME-TAX> 51,268
<INCOME-CONTINUING> 45,271
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,271
<EPS-BASIC> .05
<EPS-DILUTED> .05
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