UNITED STATES
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: March 31, 2000
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-20837
Orion Acquisition Corp. II
(Exact name of registrant as specified in its charter)
Delaware 13-3863260
(State of Incorporation) (IRS Employer Identification No.)
401 Wilshire Boulevard - Suite 1020
Santa Monica, CA 90401
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (310) 526-5000
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 May 1, 2000, 890,000 shares of Common Stock were issued and outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
ORION ACQUISITION CORP. II
(a corporation in the development stage)
BALANCE SHEETS
March 31, December 31,
2000 1999
---- ----
(Unaudited)
ASSETS
- ------
Cash $ 416,124 $522,187
US Treasury bills 1,519,763 1,506,615
Other assets 29,628 17,060
--------- ---------
Total Assets $1,965,515 $2,045,862
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses $ 45,224 $121,263
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 8,900 8,900
Additional paid-in capital 1,908,145 1,908,145
Earnings accumulated during development
stage 3,245 7,553
--------- ---------
Total stockholders' equity 1,920,292 1,924,599
--------- ---------
Total liabilities and stockholders'
equity 1,965,515 $2,045,862
========= ==========
See notes to accompanying unaudited financial statements.
2
<PAGE>
ORION ACQUISITION CORP. II
(a corporation in the development stage)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Three Months October 19,
Ended 1995 (inception)
March 31, through
2000 1999 March 31, 2000
---- ---- ----
<S> <C> <C> <C>
Interest income $ 14,085 $ 91,050 $ 1,403,277
General and administrative expense (18,393) (15,611) (672,915)
Stock based compensation expense - - (100,000)
Interest expense - - (57,694)
--------- ---------- -------------
Income (Loss) before income taxes (4,308) 75,439 572,668
Provision for income taxes - (35,591) (293,782)
--------- ----------- --------------
Net (loss) income $ (4,308) $ 39,848 $ 278,886
========== ============ ===========
Earnings per share:
Basic (0.00) $ 0.04
========== ===========
Diluted $ (0.00) $ 0.04
========== ===========
Weighted average common shares outstanding:
Basic 890,000 890,000
========== ==========
Diluted 890,000 890,000
========== ==========
</TABLE>
See notes to accompanying unaudited financial statements.
3
<PAGE>
ORION ACQUISITION CORP. II
(a corporation in the development stage)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
October 19, 1995
(inception)
through
Three Months Ended March 31,
March 31,
2000 1999 2000
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ($ 4,308) $ 39,848 $ 278,886
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Note discount amortization - - 37,500
Stock based compensation expense - - 100,000
Changes in working capital:
Increase in other assets (12,568) - (29,628)
Increase (Decrease) in accrued expenses (76,039) 45,151 45,224
--------- ------------ ----------
Cash provided by (used in) operating activities: (92,915) 84,999 231,181
--------- ------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of U.S. Treasury bills and other
increases in restricted cash (13,148) (90,950) (1,519,763)
--------- ----------- ----------
Cash provided by (used in)investing activities (13,148) (90,950) (1,519,763)
--------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend - - (7,200,000)
Issue of units and redeemable Class B
Purchase warrants, net of public
offering expenses - - 8,677,905
Issuance of unsecured promissory notes - - 100,000
Repayment of unsecured promissory notes - - (100,000)
Proceeds from related party note - - 35,000
Repayment of related party note - - (35,000)
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 - - 1,503,985
--------- ------------ -----------
NET (DECREASE) INCREASE IN CASH (106,063) (5,951) 416,124
Cash at beginning of period 552,187 11,902 -
--------- ------------ -------------
Cash at end of period $ 416,124 $ 5,951 $ 416,124
=========== ============= =============
</TABLE>
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 - 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 ("Business Combination"). All activity to date
relates to the Company's formation and fund raising. To date, the Company, as a
development stage company, has not effected a Business Combination.
All shares of the common stock outstanding immediately prior to the date of
the Offering have been placed in escrow until the occurrence of the first
Business Combination.
NOTE 2 - PRESENTATION OF INTERIM INFORMATION
The amounts included in this report are unaudited; however, in the opinion
of management, all adjustments necessary for a fair statement of results for the
stated periods have been included. These adjustments are of a normal recurring
nature. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the audited financial statements and
notes thereto included in the Company's Annual Form 10-KSB under the Securities
Act of 1934 as filed with the Securities and Exchange Commission. The results of
operations for the three months ended March 31, 2000 are not necessarily
indicative of operating results for the entire year.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Net Earnings Per Common Share
In 1997, the Financial Accounting Standards Boards issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 replaced the previously reported primary and fully diluted earnings per
5
<PAGE>
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share exclude any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. All earnings
share amounts for all periods have been presented, and where necessary, restated
to conform to the SFAS 128 requirements.
Net earnings per common share for the quarters ending March 31, 1999 and
2000 are computed by dividing net earnings by the weighted average common shares
outstanding during the year. The assumed exercise of common stock equivalents
was not utilized due to their exercise being predicated on the consummation of a
Business Combination.
(b) Income Taxes
The Company follows the Statement of Financial Accounting Standards No.
109. This statement requires that deferred income taxes based on the
consequences of temporary differences between the financial carrying amounts and
tax bases of existing assets and liabilities be recorded based on the asset and
liability method of accounting which is adjusted periodically when statutory
income tax rates change. Deferred taxes are not material.
(c) Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principals, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
(d) Fair Value of Financial Instruments
The carrying values of financial instruments including cash and U.S.
Treasury bills, approximate fair value at March 31, 1999 and 2000.
(e) Stock Options
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation ("SFAS 123"). SFAS 123 allows companies to choose whether to
account for stock-based compensation on the fair value method or to continue to
account for stock-based compensation under the current intrinsic value method as
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees."
The Company adopted the disclosure alternative under SFAS 123 during 1996 and
will continue to follow the provisions of APB Opinion No. 25.
(f) Comprehensive Income
Statement of Financial Accounting Standard No. 130. "Reporting
Comprehensive Income", ("SFAS 130") issued by the FASB is effective for
financial statements with fiscal years beginning after December 15, 1997.
Earlier application is permitted. SFAS 130 establishes standards for reporting
and display or comprehensive income and its components in a full set of general
purpose financial statements. The Company adopted SFAS 130 and it did not have
any effect on its financial position or results of operations.
NOTE 4 - INVESTMENTS
A substantial portion of the assets of the Company are invested in U.S.
Treasury Bills having various maturities of less than 6 months. The Company
classifies these securities as held to maturity. Aggregate cost basis and market
value of these securities as of March 31, 2000 totaled approximately
$1,519,762.50. No unrealized holding gains or losses have been realized.
6
<PAGE>
NOTE 5 - RELATED PARTIES
Richard C. Hoffman was secretary and a director of the Company until April
30, 1999 and during that time acted as general counsel to the Company. The
Company utilized Richard C. Hoffman, P.C., a law firm of which Mr. Hoffman is
sole shareholder, for legal services in connection with Company activities. Fees
paid by the Company for these services totaled approximately $-0- for the year
ended December 31, 1999.
On May 5, 1999 and July 20, 1999, MDB Capital Group LLC lent to the Company
an aggregate of $35,000. This loan was represented by unsecured promissory notes
due on demand, bearing no interest. The proceeds of these loans were used for
working capital. The principal on these loans was repaid on December 8, 1999.
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.
NOTE 6 - LEGAL PROCEEDINGS
On July 1, 1999, a Class B Warrantholder of the Company brought suit
against the Company, its former directors and certain others. On January 31,
2000, the plaintiff filed a notice dismissing the action without prejudice. On
January 28, 2000 the court ordered the notice of dismissal. The Company and the
plaintiff agreed that the Company will make an exchange offer to all holders of
the Class B Warrants. Upon payment of an exercise price of $0.125 per Class B
Warrant, each Class B Warrant will be exchanged for one share of Common Stock,
one Class A Warrant and one Right. The Right will be convertible into shares of
common stock based on a formula in the event that the Company makes an
acquisition or consummates a merger and the post-transaction company results in
a $7,000,000 increase in the net worth of the Company immediately after the
transaction and the common stock does not meet a minimum price of $5.75 for ten
days during the two year period following the transaction, subject to certain
adjustments, terms and conditions. The record date of the proposed exchange
offer has not been determined. The exchange offer will be made by means of a
registration statement filed with the Securities and Exchange Commission. The
Company anticipates that the offering will be made before June 30, 2000.
The former directors of Orion Acquisition Corp. II who were named as
defendants in the suit, have made demand upon the company for reimbursement of
attorney's fees incurred in defense of the suit prior to its voluntary
dismissal. The former directors contend they are entitled to reimbursement of
attorneys' fees under a provision of Delaware corporate law. The Company is
considering the reimbursement request. No accrual has been made for any
potential reimbursement in the accompanying financial statements.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results for the three-month period ending March 31, 2000, consisted of
investment income earned from Treasury bills less expenses associated with
general and administrative overheads and litigation expenses. Results for the
three months ended March 31, 1999 consisted of investment income earned from
Treasury bils held in escrow less expenses associated with general and
administrative overheads.
The Company continues to search for a suitable company to complete a
business combination or merger. There remains adequate cash on hand to bear the
costs of due diligence or legal fees necessary to locate and evaluate potential
candidates for a business combination. If a candidate is found the company may
need to raise additional funds to complete the acquisition.
7
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: Legal Proceedings
On July 1, 1999, a Class B Warrantholder of Orion brought suit against
Orion, its former directors and certain others in the United States District
Court for the Southern District of New York (99 CIV. 4782). On January 31, 2000,
the plaintiff filed a notice dismissing the action without prejudice. On January
28, 2000 the court ordered the notice of dismissal. Orion and the plaintiff
agreed that Orion will make an exchange offer to all holders of the Class B
Warrants. Upon payment of an exercise price of $0.125 per Class B Warrant, each
Class B Warrant will be exchanged for one share of common stock, one Class A
Warrant and one Right. The Right will be convertible into shares of common stock
based on a formula in the event that Orion makes an acquisition or consummates a
merger and the post transaction company results in a $7,000,000 increase in the
net worth of the company immediately after the transaction and the common stock
does not meet a minimum price of $5.75 for ten days during the two year period
following the transaction, subject to certain adjustments, terms and conditions.
The record date of the proposed exchange offer has not be determined. The
exchange offer will be made by means of a registration statement filed with the
Securities and Exchange Commission. Orion anticipates that the offering will be
made before June 30, 2000.
The former directors of Orion who were named as defendants in the suit,
have made demand upon Orion for reimbursement of attorney's fees incurred in
defense of the suit prior to its voluntary dismissal. The former directors
contend they are entitled to reimbursement of attorneys' fees under a provision
of Delaware corporate law. Orion is considering the reimbursement request.
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.
8
<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: May 15, 2000 By: /s/ Christopher A. Marlett
-------------------------------
Christopher A. Marlett
Chairman, President, and CEO
9
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
27 Financial Data Schedule (3/31/00)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 416,124
<SECURITIES> 1,519,763
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,628
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,965,515
<CURRENT-LIABILITIES> 45,224
<BONDS> 0
<COMMON> 8,900
0
1
<OTHER-SE> 1,908,145
<TOTAL-LIABILITY-AND-EQUITY> 1,965,515
<SALES> 0
<TOTAL-REVENUES> 14,086
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,393
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,308)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,308)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,308)
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
