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EXHIBIT 99.2
PRO FORMA FINANCIAL INFORMATION
On June 30, 2000, Hancock Holdings, Inc., the wholly-owned subsidiary of Orion
Technologies, Inc., ("Registrant") acquired all of the issued and outstanding
capital stock of Transaction Verification Systems, Incorporated ("TVS") through
its merger with TVS in accordance with the terms and conditions of the Agreement
and Plan of Merger dated as of June 8, 2000 ("Merger Agreement") between the
Registrant, Hancock, and TVS. Upon the consummation of the Merger, Hancock
changed its name to Transaction Verification Systems, Incorporated (the
"Surviving Company").
Prior to the Merger, TVS had 546,380 shares of common stock, par value $0.05
("TVS Common Stock"), and 20,000 shares of preferred stock, par value $10.00
("TVS Preferred Stock"), outstanding.
Pursuant to the Merger Agreement, each share of TVS Common Stock was converted
into the right to receive 0.3661 shares of the Registrant's common stock, par
value $0.001 ("Orion Common Stock"). A total of 200,030 shares of Orion Common
Stock will be issued to the holders of the TVS Common Stock. Each share of the
TVS Preferred Stock was converted into either the right to receive a promissory
note from the Surviving Company in the amount of Ten Dollars ($10.00) per share,
or upon the holder's providing proper notice to the Registrant, the right to
convert each TVS Preferred share into 2.5 shares of Orion Common Stock. As of
October 30, 2000, the holders of 9,206 and 7,294 shares of TVS Preferred Stock
elected to convert their TVS Preferred Stock into 23,105 shares of Orion Common
Stock and into promissory notes totaling $72,940, respectively. Holders of 3,500
shares of TVS Preferred Stock have not yet made their election. The holders of
TVS Preferred Stock who do not elect to receive Orion Common Stock will receive
a promissory note. The promissory notes bear interest at 8% per annum simple
interest, with principal and interest are due and payable on December 31, 2000.
The Registrant guarantees repayment of the promissory notes. The Surviving
Company intends to pay the promissory notes, when due, from revenue generated by
its operations.
The Merger Agreement contained a share adjustment provision pursuant to which,
if the combined market value of the promissory notes and Orion Common Stock
issued pursuant to the Merger did not equal $1,000,000 on the 60th day following
the Merger, then additional shares of Orion Common Stock would be issued on a
pro rata basis in order to increase the total consideration for the Merger to an
amount equal to $1,000,000 as of that date. No additional shares of Orion Common
Stock were issued since the combined market value of the total consideration on
the 60th day following the Merger exceeded $1,000,000. The consideration was
determined by arms-length negotiations between the Registrant, Hancock and TVS
and was presented to and approved by the directors of each corporation and the
shareholders of Hancock and TVS.
TVS is engaged in the design and manufacture of point of sale interface systems,
allowing merchants and retailers to record and monitor their transactions in
order to reduce inventory shrinkage. The TVS systems record point of sale
transactions in real time and allow management to analyze employee and customer
activity through the use of customized software. The Surviving Corporation
intends to continue and expand the business operations of TVS. The Registrant
accounted for this acquisition using the purchase method of accounting.
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The unaudited pro forma combined statement of operations for the six months
ended June 30, 2000 gives effect to the acquisition of TVS as if it had occurred
on January 1, 2000. The unaudited pro forma combined statement of operations is
based on historical results of operations of the Registrant and TVS for the
six-months ended June 30, 2000.
Since the pro forma combined statement of operations for the year ended June 30,
2000 for the Registrant and for TVS is unavailable, the Registrant has provided
a pro forma combined statement of operation for the six months ended June 30,
2000. The Registrant's inability to provide the required pro forma combined
statement of operations for the full year is due to its divestiture of Orion
Canada, a subsidiary that Orion divested of on June 15, 1999 and the subsequent
departure of Orion Canada's management. The preparation of such statement would
require an unreasonable expense and effort due to Orion Canada's financial
information being maintained by parties no longer affiliated with the Company.
The Registrant has also not presented a pro forma combined balance sheet as of
June 30, 2000, since the acquisition of Transaction Verification Systems,
Incorporated ("TVS") took place on June 30, 2000 and is reflected in the
consolidated balance sheet of the Registrant which was included in the
Registrants June 30, 2000 Form 10-QSB filed with the Securities and Exchange
Commission on August 14, 2000, to which the reader is referred.
The unaudited pro forma combined statement of operations and notes thereto are
intended for informational purposes only and is not necessarily indicative of
the future results of operations of the consolidated company after the
acquisition of TVS, or the results of operations of the consolidated company
that would have actually occurred had the acquisition of TVS been affected as of
the dates described above.
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Orion Technologies, Inc.
Unaudited Pro Forma Combined Statement of Operations
Six Month Period Ended June 30, 2000 for Orion Technologies, Inc. and for
Transaction Verification Systems, Inc.
<TABLE>
<CAPTION>
Orion Transaction
Technologies, Verification Pro Forma Pro Forma As
Inc. Systems, Inc. Adjustments Adjusted
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 258,889 $ 922,624 $ 1,181,513
Cost of goods sold 182,619 531,971 714,590
----------- ----------- -----------
Gross Margin 76,270 390,653 466,923
Operating expenses:
Sales and marketing 242,004 242,004
Engineering 33,118 33,118
General and administrative 1,328,529 205,764 1,534,293
Reserve for advances to
acquisition target 330,000 - 330,000
Amortization and depreciation 569,510 34,286 117,622 (a) 721,418
----------- ----------- -----------
Loss from operations 2,151,769 124,519 2,393,910
Interest and other expense, net 19,533 2,873 4,318 (b) 26,724
----------- ----------- -----------
Net loss 2,171,302 127,392 2,420,634
Preferred dividends 15,240 8,336 (8,336) (b) 15,240
----------- ----------- -----------
Net loss available to common
Stockholders $ 2,186,542 $ 135,728 $ 2,435,874
=========== =========== ===========
Basic and diluted loss per common share $ 0.55 $ 0.58
=========== ===========
Weighted average common shares outstanding 3,945,443 4,168,758
=========== ===========
</TABLE>
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Orion Technologies, Inc.
Notes to the Unaudited Pro Forma Statement of Operations
On June 30, 2000, Hancock Holdings, Inc., the wholly-owned subsidiary of Orion
Technologies, Inc., acquired all of the issued and outstanding capital stock of
Transaction Verification Systems, Incorporated ("TVS") through its merger with
TVS in accordance with the terms and conditions of the Agreement and Plan of
Merger dated as of June 8, 2000 ("Merger Agreement") between Orion, Hancock, and
TVS. Upon the consummation of the Merger, Hancock changed its name to
Transaction Verification Systems, Incorporated. The acquisition was accounted
for using the purchase method of accounting and, accordingly, the purchase price
was allocated to the tangible and intangible assets acquired and liabilities
assumed on the basis of their fair values on the acquisition date.
The following unaudited pro forma unaudited pro forma combined statements of
operations gives effect to this acquisition as if it had occurred on January 1,
2000, by combining the results of operations of the Registrant and TVS for the
six-month period ended June 30, 2000.
The unaudited pro forma financial information presented herein should be read in
conjunction with the historical financial statements and related notes of the
Registrant in the Registrant's Form 8-K/A, filed with the Securities and
Exchange Commission on June 1, 2000, the unaudited financial statements and
related notes of the Registrant in the Registrant's Form 10-QSB for the period
ended June 30, 2000, filed with the Securities and Exchange Commission on August
14, 2000, and TVS's historical financial statements included as Exhibit 99.1 in
this Form 8-K/A. The unaudited pro forma combined statements of operations is
not necessarily indicative of the operating results that would have been
achieved had the transactions been effected as of January 1, 2000 and should not
be construed as being representative of future operating results.
The aggregate preliminary purchase price of $1.3 million was determined based on
the issuance of up to 250,030 shares of the Registrant's common stock (assuming
full conversion of the issued and outstanding TVS Preferred Stock into common
stock of the Registrant, representing a maximum of 50,000 shares of the
Registrants common stock) with an estimated fair value of $1.3 million, and is
subject to revision due based on the final conversion of TVS Preferred Stock
into either Orion Common Stock or promissory notes. The Registrant believes that
the impact of this revision will not be significant. Of the total purchase
price, $1.1 million was allocated to goodwill and intangible assets, consisting
of acquired technology, trade names, and an established work force. The acquired
goodwill and intangible assets will be amortized over their estimated useful
lives of five years.
It is anticipated that the combined company will incur estimated direct
transaction charges $100,000 related to the merger, in the third and fourth
quarter of 2000, consisting primarily of legal and accounting fees. Actual
amounts ultimately incurred could differ from the estimated amounts.
Additionally, the direct transaction charges do not include integration costs
that may be incurred. Neither the Registrant nor TVS has estimated the amount or
nature of integration costs.
The following adjustments were applied to the Registrant's historical financial
statements and those of TVS to arrive at the pro forma combined statement of
operations:
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(A) To record amortization of goodwill and other intangible assets resulting
from the acquisition over the estimated period of benefit of five years.
(B) To record the interest related to the conversion of TVS preferred stock
into promissory notes, and the elimination of TVS preferred stock
dividends.
(C) Pro forma basic and diluted net loss per share for the six-month period
ended June 30, 2000, were computed using the weighted average number of
common shares outstanding. Differences between historical weighted
average shares outstanding and pro forma weighted average shares
outstanding used to compute net loss per share result from the inclusion
of shares issued in conjunction with the acquisition as if those shares
were outstanding from January 1, 2000. Dilutive options and warrants are
excluded from the computation as their effect is antidilutive.
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