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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF EXCHANGE
ACT
COMMISSION FILE NUMBER 000-29673
ORION TECHNOLOGIES, INC.
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(Name of small business issuer as specified in its charter)
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NEVADA 88-0369588
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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1800 DIAGONAL ROAD, SUITE 300
ALEXANDRIA, VIRGINIA 22314
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(Address of principal executive offices)
(703) 299-0500
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(Issuer's telephone number)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 March 31, 2000, 4,213,063 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
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ORION TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
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PART I - FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements (Unaudited)
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Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999...................................................................1
Consolidated Statement of Operations for the
Three Months Ended March 31, 2000......................................................................2
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 2000......................................................................3
Notes to Consolidated Financial Statements.............................................................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................................................7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.....................................................................................11
Item 2. Changes in Securities and Use of Proceeds.............................................................11
Item 3. Defaults Upon Senior Securities.......................................................................11
Item 4. Submission of Matters to a Vote of Security Holders...................................................11
Item 5. Other Information.....................................................................................11
Item 6. Exhibits and Reports on Form 8-K......................................................................11
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORION TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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March 31, December 31,
2000 1999
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ASSETS
Current assets:
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Cash and cash equivalents............................................ $ 51,834 $ 81,217
Accounts receivable, net ............................................ 1,031 4,532
Prepaid assets and other............................................. 28,624 34,046
---------------- ----------------
Total current assets........................................... 81,489 119,795
Property and equipment, net ............................................... 315,222 339,546
Note receivable............................................................ 250,000 -
Goodwill, net ............................................................. 1,815,866 1,980,945
Investment in joint venture................................................ 100,000 -
Other ..................................................................... 5,000 5,000
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Total assets................................................... $ 2,567,576 $ 2,445,286
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... 402,391 297,588
Accrued liabilities ................................................. 107,383 259,284
Due to OIF........................................................... 78,716 -
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Total current liabilities...................................... 588,490 556,872
Stockholders' equity :
Preferred stock, no par value, 2,500,000 shares
authorized; 65,000 shares issued and outstanding
in 2000 and 1999, respectively....................................... 135,328 135,328
Common stock, $0.01 par value, 100,000,000 shares
authorized;4,213,063 and 3,089,508 shares issued and
outstanding in 2000 and 1999, respectively........................... 4,213 3,090
Additional capital................................................... 35,903,060 34,985,443
Accumulated deficit.................................................. (34,079,333) (33,185,438)
Accumulated other comprehensive loss................................. 15,818 (50,009)
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Total stockholders' equity..................................... 1,979,086 1,888,414
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Total liabilities and stockholders' equity..................... $ 2,567,576 $ 2,445,286
================ ===================
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See accompanying notes to consolidated financial statements.
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ORION TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
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Revenues.................................................................... $ 27,630
General and administrative expense.......................................... 619,745
Amortization and depreciation............................................... 301,175
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Operating Loss.............................................................. ( 893,290)
Interest expense............................................................ ( 604)
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Net loss.................................................................... ( 893,894)
Preferred stock dividend.................................................... ( 7,620)
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Net loss available to common stockholders................................... $ ( 901,514)
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Loss per common share - Basic and Diluted .................................. $( 0.25)
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Weighted shares outstanding - Basic and Diluted............................. 3,604,443
==============
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See accompanying notes to consolidated financial statements.
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ORION TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
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Cash flows from operating activities:
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Net loss..................................................................................... $ ( 893,894)
Adjustments to reconcile net loss to cash used in operations:
Depreciation and amortization.......................................................... 301,175
Changes in operating assets and liabilities:
Increase in accounts receivable.................................................. 3,501
Increase in prepaid expenses..................................................... 5,422
Advance from OIF................................................................. 78,716
Increase in accounts payable..................................................... 105,531
Decrease in accrued expenses..................................................... (159,161)
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Net cash used in operating activities........................................................ ( 558,710)
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Cash from investing activities:
Investment in joint venture...................................................... ( 100,000)
Cash lent to acquisition candidate............................................... ( 250,000)
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Net cash used in investing activities.................................................. ( 350,000)
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Cash from financing activities:
Proceeds from issuance of common stock................................................. 813,500
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Net cash provided from financing activities.................................................. 813,500
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Effect of exchange rate changes on cash ..................................................... 65,827
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Net decrease in cash and cash equivalents.................................................... ( 29,383)
Cash and cash equivalents, beginning of period............................................... 81,217
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Cash and cash equivalents, end of period..................................................... $ 51,834
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Supplemental Cash Flow Information:
Non-Cash Investing Activities:
Issuance of 25,000 shares of common stock as payment
for the acquisition of Hancock Holdings, Inc. $ 112,500
=============
</TABLE>
See accompanying notes to consolidated financial statements.
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ORION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of Orion Technologies, Inc., (the
"Company") include the accounts of its wholly owned subsidiaries EZ Electronic
Payment Systems (EZ Elektronische Zahlungssysteme GmbH) ("EZ") and EPS
Electronic Processing (EPS Elektronische Processing Systems GmbH) ("EPS"),
Globalinx Corporation ("Globalinx"), and Hancock Holdings, Inc.
The Company is an international holding company concentrating on acquiring and
developing companies engaged in Internet and telecommunications-based
technologies and services for electronic commerce and business-to-business
markets. The Company is focusing its efforts on two lines of business -
e-commerce, including electronic point of sale systems and telecommunications.
However, at March 31, 2000 the Company operated in only one segment.
Significant intercompany accounts and transactions have been eliminated in
consolidation. In the opinion of the Company's management, the interim condensed
consolidated financial statements include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the results
for the interim periods. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The interim condensed
consolidated financial statements should be read in conjunction with the
Company's December 31, 1999 audited financial statements included with the
Company's filing on Form 8-K/A filed with the Securities and Exchange Commission
on or about May 31, 2000. The interim operating results are not necessarily
indicative of the operating results for the full fiscal year.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets, and the satisfaction of
liabilities in the normal course of business. The Company has experienced net
loss since its inception. Although the Company expects operating results to
improve, there can be no assurances that the Company will not experience adverse
results of operations in the future. The Company believes that its existing
cash, the anticipated cash flows from proposed 2000 operations, and additional
planned capital fund raising activities should provide sufficient resources to
fund its activities in 2000. The Company's continuation as a going concern is
dependent upon its ability to raise additional financing and to successfully
develop and introduce its products to market. These factors among others may
indicate that the Company will be unable to continue as a going concern. The
Company is actively pursuing additional equity financing to provide the
necessary funds for working capital and to obtain the necessary funds for
planned acquisitions and strategic partnerships. As described in Note 3, the
Company entered into a Funding and Subscription Agreement under which up to
$4,500,000 will be provided to the Company, which management believes will be
sufficient to meet its operating plans.
A statement of operations and statement of cash flows for the comparative
interim period ended March 30, 1999 are unavailable. The results of operations
for the period ended March 30, 1999 would only reflect the limited activities of
Orion Canada, a subsidiary which we divested of on June 15, 1999. Due to the
divestiture and the subsequent departure of Orion Canada's management, we are
unable to prepare or provide comparative financial statements for the interim
period of the previous year as required by Item 310 of Regulation S-B. The
preparation of such statements would require an unreasonable expense and effort
due to Orion Canada's financial information being maintained by parties no
longer affiliated with us.
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NOTE 2 - BUSINESS ACQUISITIONS
On February 22, 2000, the Company acquired all of the issued and outstanding
capital stock of Hancock Holdings, Inc. ("Hancock") from the shareholders of
Hancock in a pro rata exchange for an aggregate of 150,000 shares of the
Company's common stock. As a result of the share exchange, Hancock became a
wholly-owned subsidiary of the Company. Upon the effectiveness of the
acquisition, pursuant to Rule 12g-3(a) of the General Rules and Regulations of
the Securities and Exchange Commission, the Company became the successor issuer
to Hancock for reporting purposes under the Securities Exchange Act of 1934.
Prior to its acquisition by the Company, Hancock was a publicly reporting shell
company with substantially no assets or liabilities, and no operations. The
acquisition was accounted for under the purchase method of accounting. The
Company recorded goodwill in connection with its acquisition of Hancock of
$112,500. Subsequent to the acquisition of Hancock, the Company determined that
there was no future economic benefit of the goodwill associated with Hancock and
expensed the $112,500 to amortization expense.
On February 17, 2000, Company entered into a service agreement with MHE Projix,
LLC ("MHE"), the former majority shareholder of Hancock. Under the terms of the
agreement, MHE has agreed to provide assistance to Orion in locating a company
for possible acquisition; to provide advice to the Company for the acquisition
of such company; assist the Company in maintaining its listing on the OTCBB; and
assist the Company with preparation and filing of the any necessary regulatory
filings related to an acquisition. In consideration for providing such services,
MHE received a consulting fee of $110,000.
In January 2000, the Company entered into a joint venture agreement as a
one-third partner to form Rodan Telecom Sp.zo.o located in Warsaw Poland. The
other one-third partners are Zeto-Rodan Ltd. and GG Parkiet, both Polish
companies. The Company has agreed to invest $350,000 in three installments in
Rodan Telecom to acquire its one-third interest in the enterprise. The Company
made its first installment of $100,000 in January 2000, will make its second
installment of $150,000 in June 2000, and plans to make the third and final
installment of $100,000 in July 2000.
In January 2000, the Company executed a non-binding letter of intent for the
acquisition of a company in the business of providing security to point of sales
transactions (the "Target Company"). As set forth in the letter of intent, it is
contemplated that each share of Target Company common stock issued and
outstanding would be converted into 0.3661 shares of Company Common Stock. In
addition, the holder of each share of Target Company preferred stock issued and
outstanding immediately prior to the acquisition will have the option to be
converted to Target Company preferred stock into a promissory note with a
principal amount equal to Ten Dollars ($10.00) multiplied by the number of
shares of Target Company preferred stock being converted, and bearing simple
interest at a rate of 8% per annum, with principal and interest due and payable
on December 31, 2000, or converting each share of Target Company preferred stock
into 2.5 shares of Orion Common Stock. There are 546,380 shares of common stock
and 20,000 shares of preferred stock of Target Company outstanding.
In March 2000, the Company entered into a non-binding letter of intent for the
acquisition of a 40% interest in a privately held affinity and network marketer
of pre-paid telecommunications services located in Scottsdale, Arizona for
$6,000,000, of which $1,000,000 will be paid in cash, with the remaining amount
in Company common stock. As part of this agreement, the Company entered into a
loan agreement and promissory note with this entity under which the Company has
lent this entity a total of $250,000 as of March 31, 2000. Subsequent to March
31, 2000, the Company lent an additional $80,000. This note bears interest at
8%, is due on March 9, 2001, and is secured by the assets of the entity. In the
event that the Company enters into a stock purchase transaction with this
entity, the principle and accrued interest will be credited against the purchase
price.
NOTE 3- STOCKHOLDERS' EQUITY
In March 2000, the Company entered into a Funding and Subscription Agreement
(the "Agreement") with OIF Optimum Investment Finance AG ("OIF") for the sale of
up to 1,000,000 shares of the Company common stock to OIF at a minimum of $4.00
per share, subject to adjustment as set forth in the Agreement. As part of this
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Agreement, OIF has committed to provide working capital and operating funds of
up to $3,000,000 to the Company in four quarterly installments of $750,000,
beginning in May 2000. The Agreement also provides for OIF to provide the
Company with up to $1,500,000 of additional funding for expansion by the Company
through acquisitions, mergers or strategic partnerships. At of May 15, 2000, OIF
has provided the Company $403,000 for the purchase of 89,566 shares of Company
common stock under this Agreement.
NOTE 4- RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2000, the company incurred
approximately $85,500in costs under its verbal Agreement with NewDominion
Capital Group, Inc., a company controlled by Frans Heideman, the Company's
chief executive officer. NewDominion provides the Company with office support,
management and consulting services, including amounts paid for the services of
Frans Heideman, and other business related services. At March 31, 2000, the
Company had a payable of approximately $45,000 due to NewDominion.
Mr. Klaus Maedje, one of the Company's directors, also earns fees for preparing
the accounting and tax reports for EZ. On May 12, 2000, Mr. Maedje agreed to
convert the approximately $39,000 due him into 9,736 shares of the Company's
common stock.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements made by our management may be considered to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Act of 1995. Forward-looking statements are based on various factors
and assumptions that include known and unknown risks and uncertainties. The
words "believe," "expect," "anticipate" and "project," and similar expressions
identify forward-looking statements, which speak only as of the date the
statement was made. Such statements may include, but not be limited to,
projections of revenues, income or loss, expenses, plans, as well as assumptions
relating to the foregoing. Forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified. Future
results could differ materially from those described in forward-looking
statements as a result of the risks set forth in the following discussion, among
others.
Our financial statements have been presented on a going concern basis, which
contemplates the realization of assets and settlement of liabilities and
commitments in the normal course of business. The Company has experienced losses
since its inception. Although we expect operating results to improve, there can
be no assurances that we will not experience adverse results of operation in the
future.
Prior to May 30, 2000, our common stock was traded on the OTC, a service
operated by the Nasdaq Stock Market, Inc. under the trading symbol "ORTG". Our
common stock was removed from the OTC Bulletin Board in accordance with NASD
Market Rule 6530. Our common stock is currently listed in the electronic pink
sheets. We intend to re-list the common stock on the OTC Bulletin Board after
the SEC has completed its review of this Form 8-K/A and any amendments required
thereto.
OVERVIEW OF OUR BUSINESS AND RESULTS OF OPERATIONS
During 1999, we changed our focus, and as part of this change we acquired two
German companies, EZ Electronic Payment Systems (EZ Elektronische
Zahlungssysteme GmbH) ("EZ") and EPS Electronic Processing (EPS Elektronische
Processing Systems GmbH) ("EPS") both engaged in the business of rental of point
of sale equipment and processing transactions for electronic funds transfers at
points of sales (EFT/POS). Our focus is on providing electronic commerce and
telecommunications services. In December 1999, we formed Globalinx, a wholly
owned subsidiary that is concentrating on providing integrated
telecommunications services. Operations for both of these entities have only
recently commenced. Before the development and expansion of these businesses,
our business consisted of the operations of our subsidiary Orion Canada that was
heavily focused on eCommerce in the banking business in Asia Pacific. We
divested Orion Canada on June 15, 1999 due to its sustaining of material losses
and our belief that such losses could not be easily remedied.
We are focusing on developing the infrastructure necessary to grow both our
domestic and European EFT/POS and telecommunications operations, and we have
incurred certain costs related to that development. Many of our lines of
business are in their early stages of development. EZ is a relatively young
company, it began generating revenue in 1997, and Globalinx, formed in late
1999, began generating revenue in April 2000.
As a part of our plan, in January 2000, we entered into a joint venture
agreement as a one-third partner in Rodan Telecom Sp.zo.o located in Warsaw
Poland. We have agreed to invest $350,000 in three installments in Rodan Telecom
to acquire a one-third interest. We made our first installment of $100,000 in
January 2000, plan to make its second installment of $150,000 in June 2000, and
our third and final installment of $100,000 in July 2000. The other one-third
partners are Zeto-Rodan Ltd. and CG Parkiet, both Polish companies. Zeto-Rodan
has developed a comprehensive family of integrated software products designed
for the Polish securities trading market. Over the past five years, these
products have become the standard and are used by leading firms ranging from
Polish banks to multinationals such as Credit Swiss First Boston, Citibrokerage
S.A. and ING Baring, who collectively serve approximately 300,000 brokerage
accounts in Poland. Parkiet is the leading business information publisher in
Poland. They publish a daily paper and periodic magazine-style analysis of the
Polish financial and economic markets and participate in a consortium of the
leading financial publishers throughout the world. Rodan Telecom has developed a
new service known as ParkietOnLine Professional, which we believe is the first
of its kind in the Polish marketplace. The service allows users to monitor
realtime buy and
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sell bids, trades, index values, and specific trade data, such as volume, in
automatically updated tables and charts. In the future, Rodan Telecom plans to
expand the ParkietOnLine service to offer its securities firm users the ability
to provide on-line securities trading to their brokerage account customers. This
enterprise began commercial service in March of 2000.
Also, in January 2000, we also entered into a non-binding letter of intent to
acquire a company that manufactures and sells products and electronic systems
that enhance the capabilities of Point of Sale (POS) equipment to verify
individual transactions and document any evidence of theft. The equipment
interfaces with cameras, video tape, and ATM or cash registers, to ensure the
integrity and accuracy of transactions for retailers and banks. The market and
customer base of the target company is similar to that of EZ (small to mid-size
banks, retail and commercial businesses), although to date, the target has
concentrated its marketing efforts in the United States. We are currently
engaged in final negotiations of the acquisition documents prepared for this
transaction. The acquisition documents currently provide for our issuance of up
to 250,000 shares of our common stock as consideration for the target company.
We believe that the target company will provide value added services to our
electronic funds commerce/point of sale business and allow our family of
companies to further capitalize on marketing synergies between them. We expect
this acquisition to be consummated by June 30, 2000.
Pursuant to a Share Exchange Agreement dated February 22, 2000, we acquired all
of the issued and outstanding capital stock of Hancock Holdings, Inc. Upon the
effectiveness of the acquisition, pursuant to Rule 12g-3(a) of the General Rules
and Regulations of the Securities and Exchange Commission, the Company became
the successor issuer to Hancock for reporting purposes under the Securities
Exchange Act of 1934, which was the sole reason that we acquired Hancock. Prior
to our acquisition of Hancock, Hancock was a publicly reporting shell company
with substantially no assets or liabilities, and no operations.
In March 2000, we entered into a non-binding letter of intent for the
acquisition of a 40% interest in a privately held affinity and network marketer
of pre-paid telecommunications services located in Scottsdale, Arizona for an
amount up to $6,000,000 of which up to $625,000 will be advanced in the form of
a convertible loan, with the remaining amount in Company common stock if and
when revenue projections are met. The Company entered into a Promissory Note and
Security Agreement with this entity under which they can borrow up to $625,000.
The Company advanced this entity $250,000 in March, and additional $80,000 in
April. This amount and subsequent loan advances can be converted to equity at
the time of closing.
In order to expand our business operations, we seek to acquire additional
companies in the EFT/POS, e-commerce and telecommunications marketplace through
merger, acquisition and strategic alliance. In particular, we intend to continue
to expand our market share within the rapidly growing telecommunications
industry. The need for wireless and Internet-based protocols of
telecommunications is anticipated to grow exponentially. Technology research
firm Dataquest expects that the number of wireless data subscribers in the U.S.
alone will explode from three million in 1998 to 36 million in 2003. (Forbes
Daily Newsletter 12/03/99) The International Telecommunications Union believes
that cellular will overtake fixed-line access for voice and Internet access
within five years. The next generation of wireless and web integration is
merging into a universal handset with global service. Wireless Access Protocol
(WAP) will enable multi-medium communications capabilities for all mobile phone
users.
We believe that IP (Internet Protocol) telephony will lead the next generation
in telecommunications services. IP telephony domestic Minutes of Use (MOU) will
grow from five billion MOU in 2000 to over 50 billion MOU in 2005. A recent
survey of information system and telecom managers at major U.S. corporations
found that 80 percent have IP-based network architectures; of the remaining 20
percent, half intend to migrate to IP in 2000 (The Yankee Group). The Company is
actively seeking strategic alliances and developing its own capabilities to
deliver services with this convergent technology.
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RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000
For the first quarter ended March 31, 2000, we experienced a net loss of
approximately $893,000 a loss of $0.25 share of common stock. This loss was
caused by a combination of operating losses in EZ and start up and
administrative expenses incurred in the domestic operations of Orion and
Globalinx. As outlined above, the Company has entered into several non-binding
letters of intent for acquisitions that the Company expects to close, during the
second or third quarters of 2000. The Company also entered into, and began to
fund a Polish joint venture. We anticipate that these entities will add product
offerings and services that are in our areas of focus and will contribute both
revenues and cash flows once fully integrated and operational.
We believe that our current operations are not indicative of our future
operations. It is difficult for us to predict what those operations will consist
of, since we are in the process of refining our focus and building our Company.
We expect this to include additional acquisitions to those identified above, all
of which will need to be integrated.
REVENUES - Our revenue during the three months ended March 31, 2000 was $27,630.
This revenue came solely from the rental and servicing of Point of Sale (POS)
terminals by EZ in Germany. We began recognizing revenue in Globalinx in April
2000 from the resale of long distance telecommunications services. Globalinx now
services over 15,000 customers.
EXPENSES - During the three months ended March 31, 2000, we incurred general and
administrative expenses totaling $619,745. Of this amount, $157,691 was incurred
by our German subsidiaries. The remaining $462,054 incurred by the Company was
for professional fees, executive salaries, office rents and supplies, and
various general overhead expenses.
We expect these costs to increase in 2000 and beyond, as we implement our
business plan, which will include increased business and acquisition activity
and the expansion of our employee base. Amortization and depreciation expense
amounted to $301,175 and related primarily to the amortization of goodwill we
recorded in connection with our purchase of EZ and the write-off of $112,500 of
goodwill we recorded in our acquisition of Hancock. As we plan to complete
additional acquisitions in the future, we anticipates that we will acquire
additional property and equipment, and will record additional goodwill. This
will increase our goodwill and depreciation expense in the future.
INCOME TAXES - There was no provision for federal or state income taxes for the
period from our inception due to our operating losses. At December 31, 1999, we
had net operating loss carryforwards for income tax purposes. A valuation
allowance has been established and, accordingly, no benefit has been recognized
for our net operating losses and other deferred tax assets.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCE - Since December 31, 1999, we have raised
approximately $1,120,000 from the sale of our common stock primarily in offshore
private placements to European investors. In March 2000, the Company entered
into a Funding and Subscription Agreement with OIF for the sale of up to
1,000,000 shares of the Company's common stock to OIF at a minimum price of
$4.00 per share, subject to adjustment, as set forth in the Agreement. As part
of this Agreement, OIF has committed to provide working capital and operating
funds of up to $3,000,000 to the Company in four quarterly installments of
$750,000 beginning in May 2000. The Agreement also provides for OIF to fund the
Company with up to $1,500,000 of additional expansion funding for acquisitions,
mergers or strategic partnerships. The Agreement was entered after the
completion of the annual budgeting and planning process for the Company. The
amount and timing of additional working capital and expansion funding was
determined as a result to that planning process. A copy of the Agreement was
filed with the Form 8-K/A on even date herewith, and is incorporated herein by
reference. As of May 15, 2000, OIF has provided the Company with $403,000
through the purchase of 89,556 shares of Company common stock under this
Agreement.
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Subsequent to March 31, 2000, the Company sold an additional 67,334 shares of
common stock for $303,000. We currently have no bank loans or lines of credit
available for our use.
ANALYSIS OF CASH Flows - Net cash used in operating activities for the three
month period ended March 31,2000 was $558,710. This cash was used primarily for
funding the operations of EZ, Orion and start up expenses associated with
Globalinx.
Net cash used in investing activities consisted of advances to an entity
totaling $250,000 through March 31, 2000, and an additional $80,000 in April
2000, as described above, under a Promissory Note and Security Agreement under
which this entity can borrow up to $625,000, and our first investment
installment of $100,000 in Rodan Telecom.
We expect to increase our capital expenditures and enter into lease commitments
in the future consistent with our anticipated growth in operations,
infrastructure and personnel.
Net cash from financing activities was $813,500 during the three month period
ended March 31, 2000 from the sale of 973,555 shares of our common stock.
We expect to experience significant growth in our operating expenses in the
future, particularly as we acquire new companies, enter into strategic
partnerships and expand our product offerings as we execute our business plan.
As a result, we anticipate that these operating expenses, as well as planned
capital expenditures, will constitute a material use of our future cash
resources. In addition, we may utilize cash resources to fund acquisitions or
investments in complementary businesses, technologies or product lines. We
believe that the net proceeds from the sale of common stock under the Funding
and Subscription Agreement with OIF, supplemented by any cash flows from our
operations, will be sufficient to meet our operational and capital expenditure
requirements for at least the next twelve months. Thereafter, we may find it
necessary to obtain additional equity or debt financing. In the event additional
financing is required, we may not be able to raise it on acceptable terms or at
all. Any failure to raise additional financing will likely place the Company in
significant financial jeopardy. Therefore, the Company cannot predict the
adequacy of its capital resources on a long-term basis.
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PART II - OTHER INFORMATION
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Item 1. Legal proceedings - None.
Item 2. Changes in securities and use of proceeds - 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
No. Description
------ -----------
27.1 Financial Data Schedule (filed herewith).
B. Reports on Form 8-K: None.
</TABLE>
10
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
<TABLE>
<CAPTION>
Orion Technologies, Inc.
(Registrant)
<S> <C>
By: /s/ Frans Heideman Date: June 1, 2000
------------------------ ------------
Frans Heideman, President
and Chief Executive Officer
By: /s/ James McComas Date: June 1, 2000
------------------------ ------------
James McComas
Chief Financial Officer
</TABLE>
11
