U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED APRIL 30, 1997
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 ( NO FEE REQUIRED)
For the transition period from __________________ to _________________
Commission File No. 0-4006
ORION DIVERSIFIED TECHNOLOGIES, INC.
( Name of Small Business Issuer in its charter)
New Jersey 22-1637978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
80 Raynor Avenue, Ronkonkoma New York 11779
(Address of Principal Executive Offices) (Zip Code)
(516) 467-2301
(Issuer's Telephone Number Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
(Title of Class)
Check whether the Issuer (1) has 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 registration was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES __X__ NO ______
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|
State issuer's revenues for its most recent fiscal year. $0
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. $368,888.00.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes __X__ No _____
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Common Stock, $.01 Par Value, 1,844,397 shares
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
ITEM 1. BUSINESS
(a) Business Development
Historical
The Registrant was incorporated in New Jersey in 1959. Until 1986, the
Registrant was engaged in the marketing and sale of a line of approximately
2,500 electronic semiconductors, principally transistors, diodes and rectifiers
and, to a lesser extent, other ancillary related electronic products priced at
between $4.00 to $15.00 per item, with a majority of the items selling for less
than $5.00.
White Plains Co-op and Attempted Acquisition
During the three years and approximately nine months ended January 11, 1996, and
as previously reported in the Registrants periodic reports filed under the
Securities Exchange Act of 1934 (the "34 Act"), the development of the
Registrant's business was limited to: (i) the acquisition on February 25, 1993
from Michaels Associates, a non-affiliated business entity, of a 85.81% equity
interest in Netherland Gardens Owners, Inc., a New York corporation ("NGO") that
is the record and beneficial owner of a 59 unit co-op residential dwelling in
White Plains, New York (the "Co-op"); (ii) the execution on February 28, 1994,
of an Agreement and Plan of Reorganization (the "AFT Agreement") with AF
Technology, Inc., a non-affiliated New York corporation ("AFT"); (iii) bringing
itself current in its periodic reporting obligations under the 34 Act; (iv) the
execution of a March 4, 1994 written co-venture agreement (the "Semi Agreement")
with New Jersey Semi- Conductor Products, Inc., a non-affiliated New Jersey
corporation ("Semi"); (v) the January 11, 1996 divestiture of NGO and the Co-op;
and (vi) investigating the opportunities for a business combination with a
profitable privately owned entity.
The C0-op
The Co-op was acquired by the Registrant on February 25, 1993 pursuant to the
terms and conditions of a written agreement with Michaels (the "Michaels
Agreement"). Neither Sackler nor Namit were affiliated with the Registrant in
1993. The sole consideration for the 1993 acquisition was the original issuance
of an aggregate of 550,000 unregistered shares of the Registrant's Common Stock,
$.01 par value per share (the "Shares"), 500,000 of which were issued to
Michaels and the balance to Namit as a finder's fee. Pursuant to the Michaels
Agreement, Michaels was obligated to deliver the NGO Shares to the Registrant
free and clear of any and all liens, claims or encumbrances. Notwithstanding the
intent of the parties, and due to the fact that in 1993 Michaels had pledged the
NGO Shares to a commercial bank as collateral security for a $390,000 obligation
of Michaels to that bank, Michaels was never able to make delivery of the NGO
Shares to the Registrant. Consequently, the Shares were held by ORDT as
collateral security for Michaels obligation to deliver the NGO Shares. The
economic basis and business
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purpose for the Registrant's acquisition of the Co-op was disclosed in the
Registrant's Form 8-K Current Report dated July 12, 1993. The Registrant's
divestiture of the Co-op was accomplished by means of the recision of the
Michaels Agreement.
Pursuant to the Agreement, the Registrant released Michaels and Namit from any
and all liability and responsibility to deliver the NGO Shares to the Registrant
and transferred all of the Registrant's right, title and interest therein to
Michaels. In exchange for the Registrant's release of Michaels and Namit as
aforesaid, Michaels and Namit jointly and severally released the Registrant from
any and all obligation and responsibility to deliver an aggregate of 450,000
Shares to Michaels as provided in the Michaels Agreement and transferred and
hypothecated the Michaels Shares and any and all of Michaels' and/or Namit's
right, title and interest therein to Registrant. Finally, and by means of a
non-interest bearing, 60 day promissory note issued by Mr. Joseph Petito, the
Registrant's President, in his individual capacity, the Registrant reimbursed
Sackler for the $17,750 in expenses he incurred in connection with Michaels
transaction with the Registrant.
A.F.T. Technologies ("AFT")
Since February 28, 1994 through and including the date of this report, the
Registrant has not closed on the business combination with AFT enumerated in the
AFT Agreement. As of November 1994, the last time the Registrant took action
with respect thereto, the Registrant's Board of Directors, at the request of
Joseph Petito, delegated to Mr. Petito the decision whether to commence
litigation against AFT and its principal executive officer and owner for breach
of the AFT Agreement. At a meeting of the Board of Directors of Orion, held on
October 1, 1996, Petito recommended to the Board that the AFT Agreement should
be abandoned because litigation to enforce the Agreement would be too expensive
and the situtation concerning AFT has radically changed and it would no longer
be prudent to pursue the matter. The Board adopted Petitio's recommendation and
it was resolved that the pursuit of the AFT Agreement be abandoned.
Co-op Divestiture
On January 11, 1996 and pursuant to the terms and conditions of a written
agreement of even date therewith (the "Agreement") among the Registrant, Harry
Sackler ("Sackler") in his capacity as President of NS Equities Corporation, the
corporate General Partner of Michaels Associates, a New York Limited Partnership
("Michaels"), and Nick Namit, a Director of the registrant ("Namit"), the
Registrant divested itself of its 85.81% equity ownership of NGO. The
Registrant's equity ownership in NGO was represented by stock certificates (the
"NGO Shares"). Sackler was a Director and an affiliate of the Registrant. The
Co-op represented all but approximately $104,000 of the Registrant's total
assets, and all but approximately $133,000 of the Registrant's total liabilities
as reported in its Form 10-Q Quarterly report for the three months ended July
31, 1995. With respect to the 100,000 Shares retained by Michaels and Namit, the
Agreement provided that the resale thereof was limited to 5,000 Shares per
month.
The Registrant had two principal business purposes in implementing the
Agreement. The first was to free the Registrant from any and all responsibility
(principally the underlying bank
<PAGE>
obligation and the ongoing real estate and other tax obligations) attendant upon
Michael's failure to deliver the NGO Shares to the Registrant free and clear of
any and all liens, claims or encumbrances, by returning the parties to the
position they were in prior to the execution and delivery of the Michaels
Agreement. The second was to free the Registrant's balance sheet of liabilities
with a view towards fulfilling the stated intent of its 1990 bankruptcy
proceeding by the consummation of a business combination with a profitable
privately owned entity.
(b) Business of the Registrant
Until January 11, 1996, the Registrant's business was confined to the passive
ownership of its equity interest in NGO and the receipt of rental income from
the Co-op, the passive receipt of income from Semi's sale of the Registrant's
inventory of semi-conductor parts (the "Inventory") and the active pursuit of a
business combination partner. Since January 11, 1996, the Registrant's business
has been confined to the active pursuit of a business combination partner. In
pursuit of its business, and during the fiscal year ended April 30, 1996, none
of the information required to be disclosed and enumerated in paragraphs (b)(1)
through (b)(11) of Item 101 of Regulation S-B was applicable to the Registrant
or its business.
Notwithstanding the foregoing, the Registrant has been advised by Semi that
pursuant to the Semi Agreement, Semi caused the Registrant's Inventory to be
parameter tested by computer; cleaned; identification branded with code numbers;
dated; baked and packaged. Semi is presently offering the same for sale through
its distribution system of independent sales representatives to a wide range of
original equipment manufacturers located throughout the United States and
overseas. Pursuant to the Semi Agreement, the Registrant is to receive 50% of
any and all sales of the Inventory by Semi. As of the date of this Report, the
Registrant has only received a $5,000 advance from Semi under the Semi
Agreement. No income was received from Semi during the fiscal year ended April
30, 1997.
Based upon its prior experience with the semi-conductor industry, the Registrant
believes that while price is the principal method of competition, product
performance, reliability and ease of use are important competitive
considerations and may be deemed to be ancillary methods of competition in the
semiconductor industry. The Registrant believes that Semi attempts to compete
primarily by means of offering a more varied inventory of semiconductor products
and maintaining a capability to ship relatively small quantities of products on
short notice, methods which would be uneconomical for its large competitors.
The Registrant believes that the Inventory marketed and sold by Semi continues
to be utilized to a limited extent in a variety of industrial, commercial and
consumer goods, including the electronic systems in automobile, minicomputers,
microcomputers, television sets and radios. A transistor is a device with three
or more electrodes capable of amplifying power. A diode is a device with two
electrodes capable of regulating voltage allowing current to flow chiefly in one
direction. A rectifier is a device capable of converting alternating current
into direct current.
<PAGE>
The Registrant does not employ any full time employees. Mr. Joseph Petito, the
Registrant's President and Chief Executive and Financial Officer, continues to
devote such percentage of his full time and attention to the business of the
Registrant as is required.
(c) The Registrant's Common Stock Purchase Warrants
As part of the Registrant's Plan of Reorganization as confirmed by the United
States Bankruptcy Court for the Eastern District of New York on April 30, 1990
and consummated on June 2, 1992 (the "Plan"), the Registrant has issued an
aggregate of 903,762 Series A Common Stock Purchase Warrants (the "Series A
Warrants") and an aggregate of 905,262 Series B Common Stock Purchase Warrants
(the "Series B Warrants"). The Series A Warrants were exercisable at $2.50 per
share within fifteen (15) months from June 2, 1992, the payment date under the
Plan, or such further extension as the Registrant may grant. The Series B
Warrants were exercisable at $3.50 per share within thirty (30) months from the
payment date under the Plan, or such further extension as the Registrant may
grant.
On September 19, 1990, and as required by the Plan, the Registrant prepared and
forwarded to all stockholders of record, a notice advising stockholders as to
the applicable terms of the Plan (the "Notice"); the operative provisions of the
Notice were as follows:
1. All theretofore issued and outstanding shares of the Registrant's Common
Stock, $.01 par value per share, which were restricted securities were canceled
and would not be reissued;
2. All non-legend stock (free-trading) was also canceled but was reissued
at a reverse-split ratio of three new shares for every seven "old" shares turned
in. Each "new" share was accompanied by two Common Stock Purchase Warrants; a
Class A Warrant exercisable within fifteen months and entitling the holder to
purchase one additional "new" share of the Registrant's Common Stock at $2.50;
and a Class B Warrant exercisable at any time within thirty months and entitling
the holder to purchase one additional "new" share of the Registrant's Common
Stock at $3.50 a share. A unit consists of one Common Stock certificate and two
Warrant certificates. Stockholders will be required to pay a transfer fee to the
transfer agent.
The condition of the above-mentioned re-issuance was that all shares in the
stockholders' possession, or in possession of the shareholder's broker, be
returned to the Registrant's then transfer agent, Liberty Transfer Co., by the
cut-off date which was set at November 15, 1990, 5:00 p.m. Eastern Standard
Time. Failure to comply with this provision would result in the cancellation of
any shares theretofore owned by stockholders.
On November 12, 1990, the Registrant prepared and forwarded to all stockholders
of record a notice advising the stockholders that the expiration date to
surrender and exchange their Common Stock certificates had been extended to 5:00
p.m. on Monday, December 31, 1990. On January 20, 1992, due to the bankruptcy
proceedings and the Registrant's slow restart-up the Board of Directors extended
the Class A warrants six months to June 30, 1993.
<PAGE>
The jurisdiction of the Bankruptcy Court over the affairs of the Registrant
ended on June 2, 1992 when the Bankruptcy Court entered the order of
consummation. Due principally to the longer than anticipated commencement date
of operations and with a view towards granting to stockholders the benefit
intended in the Plan, management determined that the six months extension for
the warrants would be inadequate. Accordingly, on April 21, 1993 the Board of
Directors extended the warrants to December 31, 1994. For the same reasons, and
on July 8, 1994, the Board of Directors voted to extend both classes of warrants
until the close of business on December 31, 1995. A notice to this effect was
mailed to the Registrant's stockholders. Further, on October 15, 1995, at a
meeting of the Board, at which a majority was present, it was unanimously
resolved that both the A and B Warrants be extended to the close of business on
December 31, 1997, and a notice was sent to all shareholders and interested
stockbrokers.
ITEM 2. DESCRIPTION OF PROPERTY
(a)(1) Rental Premises. From May 1, 1991 through June 1995, the Registrant
maintained its executive offices at 659 Old Willets Path, Hauppauge, New York
11788, where approximately 5,000 square feet of space was subleased from Adaer
Berkeley Colleton Inc., an affiliated landlord, at $1895.00 per month on a month
to month basis without the benefit of a written sublease. In addition to rent,
the Registrant was responsible for its proportionate share of increases in real
estate taxes. During the fiscal year ended April 30, 1995, the Registrant did
not pay any real estate taxes to Adaer Berkeley Colleton Inc. a New York
corporation controlled by or under common control of Joseph Petito the
Registrant's President. In the opinion of management, the registrant's Hauppauge
facility was adequate for the Registrant's needs and was being utilized to
approximately 85% of its capacity. During the fiscal year ended April 30, 1995,
and due principally to the Registrant's lack of operating income, 100% of the
Registrant's rent and operating expenses at its Hauppauge office were assumed
and paid by Joseph Petito. Notwithstanding the Registrant's inability to pay
rent, and in the opinion of the Registrant's Board of Directors, the rental
charged to the Registrant by Adaer Berkeley Colleton Inc. was less than the
rental the Registrant could have obtained at arms length from a non-affiliated
landlord. The property, 659 Old Willets Path, Hauppauge, L.I., New York, is
owned and operated by VIP Associates, an entity non-affiliated with either the
Registrant or Joseph Petito.
In June 1995, the Hauppauge facility was partially destroyed by fire. As a
result thereof, the Registrant moved its executive offices to 80 Raynor Avenue,
Ronkonkoma, New York 11779, where approximately 500 square feet of space is
sublet from Joseph Petito, an affiliated landlord, rent free on a month to month
basis without the benefit of a written sublease. The sublet offices are suitable
for the Registrant's present needs and are being utilized to 100% of their
capacity. The Registrant also has the benefit of the use of telephones and
office equipment provided by Mr. Petito without charge.
(a)(2) Inventory . Pursuant to the terms of the Semi Agreement, the Registrant
has a fifty percent income interest in the Inventory. Management believes that
this inventory should be abandoned because the cost of running an audited
inventory year after year is a greater expense than the value of the inventory,
and Management will propose that the inventory be abandoned as being worthless,
at the next Board Meeting.
<PAGE>
(b). Investment Policies. Although the Registrant owned the NGO Shares as one of
its principal assets for a portion of the fiscal year ended April 30, 1996, the
Registrant was not engaged in the business of investing in real estate, real
estate Mortgages, real estate trusts or partnerships or real estate securities.
Accordingly, and except for the desire to preserve the Co-op and to generate
income from its ownership of the NGO Shares, the Registrant did not have any
established policy with respect to real estate. In the opinion of management,
the disclosure required by subparagraphs (1) through (3) of this paragraph (b)
are inapplicable to the Registrant.
(c) Description of Real Estate and Operating Data.
(1) The only property held by the Registrant during the fiscal year ended
April 30, 1996 was the NGO Shares. NGO owns the Co-op consisting of two
buildings having 59 units for sale and 1 management service unit located in
White Plains, New York.
(2) The NGO Shares were encumbered by the Mortgages and a lien of $390,000
which lien must be paid off by Michael Associates the seller. As of April 30,
1995, the principal balance of the Mortgages was $3,180,060 (comprised of a
$1,405,060 first and a $1,775,000 wrap around) the monthly payments aggregate
$9,897.91 and the Mortgages mature on 2010. In light of the Registrant's
divestiture of the Co-op and NGO, the principal balance of the Mortgages and
their monthly payments is not relevant to the Registrant and this information
was not obtained.
(3) Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities. Inapplicable.
(4) In light of the Registrant's divestiture of the Co-op and NGO, the
information called for herein is inapplicable. However, and during the period
which the Registrant owned the Co-op, the Registrant had no intention of nor did
it cause any improvements to the Co-op other than ordinary and necessary
maintenance and repairs.
(5) The co-op real estate market in White Plains, New York is very
competitive with an abundance of available units at competitive prices.
(6) In the opinion of management, and during the period which the
Registrant owned the Co-op, the Co-op was adequately covered by liability and
other insurance.
(7) With respect to the Co-op, and during the period which the Registrant
owned the Co-op: (i) the occupancy rate was 17% with 10 units sold and 49 units
remaining unsold including the one unit occupied by the super; (ii)
inapplicable; (iii) none; (iv) the average selling price for each of the sold
units was $48,000 and the average selling price of the unsold units is $45,000;
(v) the Co-op was comprised of rental units; (vi) (A) inapplicable; (B)
inapplicable; (C) the method was straight line depreciation; and (D) the life of
the CO-op for depreciation purposes was 27 1/2 years; and (vii) and the annual
real estate taxes for the past year were $ 61,561.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Since the consummation of the Plan of Reorganization on June 2, 1992, no
material legal proceeding was pending or threatened against or settled by the
Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Neither during the fourth quarter of the fiscal year ended April 30, 1997 nor at
any time since August 15, 1994 did the Registrant conduct an Annual Meeting of
its stockholders pursuant to definitive proxy materials under Regulation 14 A
under the Act or otherwise.
PART II
ITEM 5. MARKET FOR COMMON STOCK EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information.
The principal market for the Registrant's Common Stock, its only class of equity
securities, is the over-the-counter market.
The following table indicates the quarterly high and low price ranges of the
Registrant's Common stock representing actual trades in the over- the-counter
market during the fiscal years ended April 30, 1996 and April 30, 1997, as
reported by the Trading and Market Service of the Nasdaq Stock Market, Inc.
HIGH LOW
---- ---
Fiscal 1996:
- -----------
FIRST QUARTER
May 1st thru
July 31, 1995 2.75 1.00
SECOND QUARTER
August 1st thru
October 31, 1995 3.25 .50
THIRD QUARTER
November 1st thru
January 31, 1996 2.00 1.00
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FOURTH QUARTER
February 1st thru
April 30, 1996 3.00 1.625
Fiscal 1997:
FIRST QUARTER
May 1st thru
July 31, 1996 2.50 .75
SECOND QUARTER
August 1st thru
October 31, 1996 3.00 .50
THIRD QUARTER
November 1st thru
January 31, 1997 1.50 .50
FOURTH QUARTER
February 1st thru
April 30, 1997 1.25 .25
Fiscal 1998
FIRST QUARTER
May 1st thru
July 31, 1997 .75 .25
(b) Holders.
As of July 31, 1997, the approximate number of holders of record of shares of
the Registrant's Common Stock,$.01 par value per share and Series A and Series B
Warrants, the Registrant's only class of trading securities, was believed by
management to be as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, $.01 par 325
Series A Warrant 285
Series B Warrant 286
Management believes there are many shareholders and warrant holders whose
securities are held in street name with various brokerage houses. The exact
number are unknown to Registrant.
<PAGE>
(c) Dividends.
The Registrant has paid no dividends during the fiscal years ended April 30,
1996 and April 30, 1997. Other than the requirements of the New Jersey Business
Corporation Act that dividends be paid out of capital surplus only and that the
declaration and payment of a dividend not render the Registrant insolvent, there
are no restrictions on the Registrant's present or future ability to pay
dividends.
The payment by the Registrant of dividends, if any, in the future rests within
the discretion of its Board of Directors and will depend, among other things,
upon the Registrant's earnings, its capital requirements and its financial
conditions, as well as other relevant factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) Plan of Operation. Inapplicable.
(b) Management's Discussion and Analysis of Financial Condition and Results of
Operations.
(1)(A) Fiscal Year Ended April 30, 1997. During the fiscal year ended April 30,
1997, the Registrant had a net loss of $150.00 on $0.00 of gross revenues
compared to a $70,260 net loss on $194,371 of gross revenues during the previous
fiscal year. The Registrant attributes the reduction n its loss in the fiscal
year ended April 30, 1997, to the fact that it did not have any gross revenues
during the fiscal year ended April 30, 1997, and divestiture of NGO.
(1(B) Fiscal Year Ended April 30, 1996. During the fiscal year ended April 30,
1996, the Registrant had a net loss of $70,260 on $194,371 of gross revenues. As
of the year ended April 30, 1997, current liabilities were $266,327 compared to
the year ended April 30, 1996 of $266,177. The increase was due to the increase
in accrued taxes and that due officer for reimbursement of expenses.
ITEM 7. FINANCIAL STATEMENTS
Financial statements meeting the requirements of Item 310 of regulation S-B, for
the fiscal year ending April 30, 1997 were prepared by Meyer Zimmerman. The
Financial statements meeting the requirements of Item 310 of regulation S-B, for
the year ending April 30, 1996 were prepared by Meyer Zimmerman. Both are
annexed as a separate section to this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes or disagreements.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
(a) Identify Directors and Executive Officers.
The following table sets forth: (1) names and ages of all persons who presently
are and who have been selected as directors of the Registrant; (2) all positions
and offices with the Registrant held by each such person; (3) the term or office
of each person named as a director; and 4) any period during which he or she has
served a such:
Duration and
Expiration Position & Age and
Date of Office with Director
Name Present Term Registrant Since
- ---- ------------ ---------- -----
Joseph Petito Next Annual President, 77,March,1983
Meeting Chief Executive
Officer and Chief
Financial Officer
Irwin Lampert Next Annual Vice President, 59,January,1995
Meeting Secretary
and Director (1)
- ------------
(1) Irwin Lampert was elected to the Registrant's Board of Directors on January
2, 1995 upon the resignation Donald Epstein, to serve until the next annual
meeting of the Board of Directors. On the same day, Mr. Lampert was elected
Secretary of the Registrant, upon Mr. Epstein's resignation from that office.
There is no understanding or arrangement between any directors or any other
person or persons pursuant to which such individual was or is to be selected as
a director or nominee of the Registrant.
(4) Business Experience
The following is a brief account of the experience, during the past five years,
of each director and executive officers of the Registrant:
JOSEPH PETITO, Mr. Petito has been continually employed by the Registrant since
1986. From 1983 to 1986, Mr. Petito was the Registrant's Chairman of the Board
of Directors and since 1986 has served as its President and Chief Executive
Officer. Simultaneously therewith, Mr. Petito had been the President, and a
principal shareholder of Aardvark Sanitation Co., Inc., an
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independent industrial waste removal hauler located in Islip, New York, since
that company's inception in 1973. Simultaneously, and since its inception in
1979, Mr. Petito had served as Secretary, Treasurer, Director and principal
shareholder of Island Salvage Haulers, Inc., an independent industrial waste
removal concern in Garden City, New York. During the past ten years, Mr. Petito
has also acted as an independent management consultant specializing in the
design, installation and operation of solid, liquid and hazardous waste removal
systems for commercial and industrial application. During the past ten years,
Mr. Petito has also had other executive and directorial affiliations.
IRWIN LAMPERT, since April 1995 has been a self employed electrical engineering
and defense contracting consultant in Brooklyn, New York. Prior thereto since
1986, Mr. Lampert was an executive officer, director and principal stockholder
of American Finishing & Spray, Inc., a privately owned New Jersey corporation
engaged in the distribution and sale of coating technology for industrial and
military application in Newark, New Jersey. Prior thereto since 1975, Mr.
Lampert was employed by E-TRON Corp., a publicly owned corporation based in
Edison, Jersey and engaged in the manufacture of electromechanical components
for the United States military, in increasingly responsible positions including
President and Chief Executive Officer. Prior thereto since 1959, Mr. Lampert was
employed as an electrical engineer by various firms principally engaged as
defense contractors. Mr. Lampert received a Bachelor of Science degree in
Electrical Engineering from the City University of the State of New York in 1959
and a Master of Science degree in Electrical Engineering from Polytechnic
Institute of New York in 1961. Mr. Lampert received a Juris Doctor degree from
Brooklyn Law School in 1965.
(5) Directorship
Each Director of the Registrant has indicated to the Registrant that he or she
is not a director in any other Registrant with a class of securities registered
pursuant to Section 12 of the 34 Act or subject to the requirements of Section
15(d) of such act or any investment Registrant registered under the Investment
Registrant Act of 1940.
(b) Identification of Certain Significant Employees
The Registrant does not presently employ any person as a significant employee
who is not an executive officer but who makes or is expected to make a
significant contribution to the business of the Registrant.
(c) Family Relationships
No family relationship exist between any director or executive officers of the
Registrant.
(d) Involvement in Certain Legal Proceedings
No event listed in Sub-paragraphs (1) through (4) of Subparagraph (d) of Item
401 of Regulation S-B, as occurred with respect to any present executive officer
or director of the Registrant or any
<PAGE>
nominee for director during the past five years and which is material to an
evaluation of the ability or integrity of such director or officer.
ITEM 10. EXECUTIVE COMPENSATION.
(a) General
(1) through (7) All Compensation Covered. During the fiscal year ended April 30,
1996, no compensation was paid to, accrued or set aside for any executive
officer or director of the Registrant.
(b) Summary Compensation Table.
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Name and Other Restricted Securities All Other
Principal Annual Com- Stock Underlying LTIP Compen
Position Year Salary Bonus pensation Award(s) Options Payouts sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph Petito 1994 $78,000(1) None None None None None None
Joseph Petito 1995 $78,000(1) None None None None None None
Joseph Petito 1996 $78,000(1) None None None None None None
Joseph Petito 1997 $78,000(1) None None None None None None
</TABLE>
- ----------------------
(1) On July 24, 1995, the Registrant received a written statement from Joseph
Petito wherein and whereby he irrevocably waived any and all claims that he may
have to receive compensation from the Registrant for the four fiscal years ended
April 30, 1996 in the sum of $312,000 plus any and all accrued interest. Mr.
Petito also waived any right that he may have under and with respect to the
October 1, 1992 verbal agreement with the Board of Directors granting him the
right and option to convert the Registrant's debt and obligation to him into two
shares of the Registrant's Common Stock, at $.01 par value, for every $1.00 of
debt.
(c) Option/SAR Grant Table. During the fiscal year ended April 30, 1997, no
grants of stock options or freestanding SAR's were made by the Registrant.
(d) Aggregate Option/SAR Exercises and Fiscal Year- End Option/SAR Value Table.
No stock options or freestanding SAR's are issued or outstanding. Accordingly,
and during the fiscal year ended April 30, 1997, no stock options or
freestanding SAR's were exercised. Notwithstanding
<PAGE>
the foregoing, an aggregate of 1,000,000 shares of the Registrant's Common
Stock, $.01 par value per share are reserved for issuance pursuant to the
Registrant's long-term incentive plan adopted by the Registrant's Board of
Directors in August, 1990, but not yet ratified and approved by the Registrant's
stockholders.
(e) Long-Term Incentive Plan ("LTIP") Awards Table. During the fiscal year ended
April 30, 1997, no LTIP awards were made by the Registrant.
(f) Compensation of Directors. (1) and (2). During the fiscal year ended April
30, 1997, no director of the Registrant received any compensation, whether
pursuant to any standard or other arrangement or otherwise.
(g) Employment Contracts and Termination of Employment, and Change-in Control
Arrangements. (1) and (2). No executive officer, director or employee of the
Registrant is serving pursuant to the terms of a written employment or other
compensation agreement, understanding or arrangement with the Registrant; and no
such agreement was entered into during the fiscal year ended April 30, 1997.
(h) Report on Repricing of Options/SAR's. No stock options or freestanding SAR's
are issued or outstanding. Accordingly, and during the fiscal year ended April
30, 1997, no stock options or freestanding SAR's were repriced.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owner. The information is furnished
as of April 30, 1997, as to the number of shares of the Registrant's Common
Stock, $.01 par value per share owned beneficially or known by the Registrant to
own beneficially more than 5% of any class of such security:
Name and Address Amount and Nature
of Beneficial of Beneficial
Owner Ownership Percentage of Class
- ----- ----------------- -------------------
Adaer Berkeley Colletone, Inc. 150,000 8.1%
659 Old Willets path
Hauppauge, NY 11788 (1)
Anita E. Petito 180,500 9.8%
659 Old Willets Path
Hauppauge, NY 11788 (2)
- --------------------------
<PAGE>
(1) A New York corporation controlled by and under common control of Joseph
Petito, the Registrant's President and Chief Executive Officer and hereinafter
referred to as "ABC". See Item 11(b).
(2) Wife of Joseph Petito. See Item 11(b).
(b) Security Ownership of Management. The information is furnished as of July
30, 1997, as to the number of shares of the Registrant's Common Stock, $.01 par
value per share owned beneficially by each executive officer and director of the
Registrant and by all executive officers and directors as a group:
Name and Address Amount and Nature
of Beneficial of Beneficial
Owner Ownership Percentage of Class
- ----- ----------------- -------------------
Joseph Petito 935,084 (1)(2)(3) 49%
659 Old Willets Path
Hauppauge, NY 11788
Irwin Lampert 15,000(4) 0.75%
1707 East 55th Street
Brooklyn, NY 11234
All Officers
and 49.75%
Directors as a Group
- --------------------------
(1) Does not include an aggregate of 563,400 Series A Common Stock Purchase
Warrants or an aggregate of 563,400 Series B Common Stock Purchase Warrants
owned by Mr. Petito and granted to him as a Class II and a Class IV creditor and
pursuant to Article III (Class V) of the Plan. In the event all publicly owned
Class A and Class B Warrants are exercised and Mr. Petito exercised his Class A
and Class B Warrants, there will be an aggregate of 4,061,422 shares of the
Registrant's Common Stock issued and outstanding.
(2) Includes an aggregate of 180,500 shares of the Registrant's Common stock
owned of record by Anita E. Petito, wife of Joseph Petito and an aggregate of
150,000 shares of the Registrant's Common Stock owned of record by ABC.
(3) Does not include an aggregate of 101,500 shares of the Registrant's Common
Stock owned of record by Anita M. Petito, the adult daughter of Joseph Petito or
27,400 shares owned by her husband, neither of whom reside in the same household
as Joseph Petito.
(4) Includes an aggregate of 5,000 shares of the Registrant's Common Stock owned
of record by Philip T. Lampert, the son of Irwin Lampert, who resides in same
household as Irwin Lampert.
<PAGE>
(c) Changes in Control. As of the date of this Report, the Registrant has not
entered into any agreements, the operation of which may at a subsequent date
result in a change of control of the Registrant.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a)(b) On July 30, 1997, the Registrant received a written statement from Joseph
Petito wherein and whereby he irrevocably waived any and all claims that he may
have to receive compensation from the Registrant for the four fiscal years ended
April 30, 1997 in the sum of $312,000 plus any and all accrued interest. Mr.
Petito also waived any right that he may have under and with respect to the
October 1, 1992 verbal agreement with the Board of Directors granting him the
right and option to convert the Registrant's debt and obligation to him into two
shares of the Registrant's Common Stock, at $.01 par value, for every $1.00 of
debt.
Except for the foregoing and during the fiscal year ended April 30, 1997 and
April 30, 1996, no officer, director or relative or spouse of the foregoing
persons or any relative of such person who has the same home as such person, or
is a director or other officer of any parent or subsidiary of the Registrant or
any shareholder known by the Registrant to own of record or beneficially more
than five (5%) percent of the Registrant's Common Stock, had a direct or
indirect material interest in any transaction or presently proposed transaction
to which the Registrant or any of its parents or subsidiaries was or is a party.
(c) Parents. The following individuals and entities may be deemed to be parents
of the Registrant: (i) Joseph Petito, the record and beneficial owner of an
aggregate of 934,934 shares of the Registrant's Common Stock; (ii) Anita E.
Petito, the record and beneficial owner of an aggregate of 180,500 shares of the
Registrant's Common Stock; and ABC, the record and beneficial owner of an
aggregate of 150,000 shares of the Registrant's Common Stock, which are included
in the aggregate amount shown for Joseph Petito; (iii) Irwin Lampert, the record
and beneficial owner of an aggregate of 15,000 shares.
(d) Transactions with Promoters. Inapplicable.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits and Index Required.
(1) EXHIBIT INDEX
Description of Document Location
(3)(a) Certificate of Incorporation Exhibit (1)(i) filed with Form S-1
Registration Statement
(3)(b) Certificate of Amendment to Item (1)(ii) filed with Form 10K
Certificate of Incorporation year ended April 30, 1983
<PAGE>
(3) By-Laws Exhibit (b)(ii) filed with Form S-1
Registration Statement
(4) Instruments defining the rights
of security holders, including
indentures
(a) Form of Common Stock Filed with Form 10K year ended April 30,
1993
(b) Form of Class A Common Filed with Form 10K year ended April 30,
Stock Purchase Warrant 1993
(c) Form of Class B Common Filed with Form 10K year ended April 30,
Stock Purchase Warrant 1993
(10) Material Contracts
(a) Disclosure Statement dated Filed with Form 10K year ended April 30,
December 15, 1989 1993
(b) Plan of Reorganization
dated December 15, 1989 Filed with Form 10K year ended April 30,
1993
(c) Order confirming Plan of Filed with Form 10K year ended April 30,
Arrangement dated 1993
April 30, 1990
(d) Letter of transmittal to Filed with Form 10K year ended April 30,
stockholders dated 1993
September 19, 1990,
together with related letter 1993
of transmittal from Liberty
Transfer Co.
(e) Consummation Order-Final Decree Filed with Form 10K year ended April 30,
dated June 2, 1992 1993
(11) Statement re computation of N/A
<PAGE>
Per Share Earnings
(12) Statements re computation of N/A
ratios
(13) Annual Report to Security N/A
Holders, Form 10-K, or quarterly
reports, 10-Q, to security
holders
(16) Letter on Change in Certifying Letter from Scarano & Lipton filed
Accountants with this report
(18) Letter re changes in N/A
accounting principles
(19) Previously unfiled documents N/A
(22) Subsidiaries of the Registrant Filed with Form 8K July 18, 1993
(23) Published report regarding N/A
matters submitted to vote on
security holders
(24) Consents to experts and
counsel Page II-6 filed with Form S-1
Registration Statement
(25) Power of Attorney N/A
(26) Additional Exhibits N/A
(b) Reports on Form 8-K. During the fiscal year ended April 30, 1997, a report
on Form 8-K was prepared and filed by the Registrant.
SIGNATURES
Pursuant to the requirements of Section 12 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.
Dated: Ronkonkoma, New York
<PAGE>
September 25, 1997
ORION DIVERSIFIED TECHNOLOGIES, INC.
BY:
----------------------------------
JOSEPH PETITO, President and Chief
Executive Officer, Treasurer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in their capacities and on the dates indicated.
Dated: Ronkonkoma, New York
September 25, 1997
----------------------------------
JOSEPH PETITO, Director
Dated: Ronkonkoma, New York
September 25 , 1997
----------------------------------
IRWIN LAMPERT, Director
<PAGE>
To the Board of Directors and Stockholders of
Orion Diversified Technologies Inc.
Hauppauge, New York
I have audited the accompanying balance sheets of Orion Diversified
Technologies, Inc. and its 86% majority-owned subsidiary as of April 30,1 997
and 1996 and the related consolidated statements of operations, stockholders
equity (deficiency) and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits. I did
not audit the financial statements of Netherland Gardens Owners, Inc. (the
"Company's 86% majority-owned subsidiary), which statements reflect total assets
constituting approximately 89% and 90% of consolidated total assets as of April
30,1996 and total revenues constituting approximately 100% of consolidated total
revenues for the year ended April 30, 1996. Such financial statements were
audited by another auditor whose report has been furnished to me, and my
opinion, insofar as it relates to the amount included for Netherland Gardens
Owners, Inc. is based solely on the report of such other auditor.
Except as discussed in the following paragraphs, I conducted my audits in
accordance with generally accepted auditing standards. Those standards require
that I plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement/ Am audit includes
assessing the evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit and the report of the
other auditor provides a reasonable basis for my opinion.
The Company did not count its physical inventory at April 30, 1997 and 1996
because identification of items and quantities were destroyed during the
physical relocation of the inventory. Therefor, I was unable to observe the
physical inventories and satisfy myself about inventory items and quantities.
In my opinion, based on my audits and reports of another auditor, except for the
effects of such adjustments if any, as might have been determined to be
necessary had I been able to observe the physical inventories, the financial
statements fairly, in all material respects, reflect the financial position of
Orion Diversified Technologies, Inc. and its 86%-owned subsidiary as of April
30, 1996 and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 1(b) to the
financial statements, the Company has incurred losses for several years that
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1(b).
<PAGE>
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Meyer Zimmerman
Woodbury, New York
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
BALANCE SHEET
April 30, April 30,
1997 1996
-------- --------
ASSETS
------
Current Assets:
Cash 0 0
Maintenance Receivables 0 0
Inventory 104,101 104,101
Rent Receivable 0 0
Due from Michaels Associates 0 0
-------- --------
Net to allow for bad debts of $242,000
Total Current Assets 104,101 104,101
-------- --------
Property:
Land 0 0
Buildings (Net) 0 0
0 0
-------- --------
Other Assets:
Cash - Capital Reserve 0 0
Excess of Cost Over Net Assets Acquired 0 0
Security Deposit 0 0
-------- --------
Total Assets 104,101 104,101
-------- --------
LIABILITIES & STOCKHOLDERS EQUITY
---------------------------------
Current Liabilities
Accounts Payable and Accrued Expenses 5,000 5,000
Due to Officers 123,862 123,712
Payroll Taxes Payable - Chapter XI 137,465 137,465
Payroll Taxes Payable 0 0
-------- --------
266,327 266,177
-------- --------
LONG TERM DEBT
--------------
Mortgage Payable
Total Liabilities 0 0
Total Liabilities 266,327 266,177
Minority Interest in Subsidiary 0 0
-------- --------
Stockholders Equity
Common Stock, Par Value $.01 184,443 18,443
Paid-In Capital 3,737 3,737
Deficit (184,402) (184,256)
-------- --------
Total Stockholders Equity (162,226) (162,076)
-------- --------
Total Liabilities & Stockholders Equity 104,101 104,101
-------- --------
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
THE YEAR ENDED APRIL 30, 1997 AND 1996 (CONSOLIDATED)
INCOME 1997 1996
- ------ ---- ----
Revenues
Maintenance Fees 0 194,371
---------- ----------
Costs & Expenses
General & Administrative 150 93,133
Interest 0 93,188
Depreciation & Amortization 0 88,600
---------- ----------
Total Costs & Expenses 150 274,921
---------- ----------
Loss Before Minority Interest 0 (80,550)
Minority Interest in Net Loss of
Subsidiary 0 10,290
---------- ----------
Net Loss (150) (70,260)
---------- ----------
Net Loss Per Common Share Nil (.03)
Weighted Average Number of Common Shares 1,844,397 1,844,397
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
THE YEAR ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
Additional
Common Stock Paid In Accumulated
Shares Amount Capital Deficient Total
------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance 4/30/96 1,844,397 $ 18,443 $ 3,373 $ (184,256) $ (162,076)
Loss For Period 150) $ (150)
-------------------------------------------------------------- -----------
1,844,397 $ 18,447 $ 3,373 $ 184,406 $ (162,226)
</TABLE>
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS FOR
THE YEAR ENDED APRIL 30, 1997 AND 1996 (CONSOLIDATED)
1997 1996
---- ----
Cash Flow from Operating Activities
Net Loss (150) (70,260)
Adjustments to Reconcile Net Loss
to Net Cash Provided by (Used For)
Operating Activities
Depreciation & Amortization 0 0
Minority Interest in Net Loss of Subsidiary 0 324,265
Changes in Assets & Liabilities
Accounts Receivable 0 4,715
Rent Receivables 0 0
Due From Michaels Associates 0 369,547
Purchase of Equipment 0 0
Provision for Bad Debts 0 0
Accounts Payable & Accrued Expenses 0 (293,358)
Payroll Taxes Payable 150 (30,244)
Due to Officers 0 7,399
Mortgage Payable 0 (1,775,000)
Capital Reduction 0 (20,305)
Land 0 470,350
Building 0 3,636,109
Other Assets 0 32,306
Loan Payable - Other 0 0
---------- ----------
Net Cash Provided By (Used In) Operations 0 (3,201)
---------- ----------
Net Increase/Decrease in Cash 0 (3,201)
---------- ----------
Cash - Beginning 0 3,201
---------- ----------
Cash - Ending 0 0
---------- ----------
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS FOR
THE YEAR ENDED APRIL 30, 1997 AND 1996 (CONSOLIDATED)
1997 1996
------- -------
Supplemental Disclosure of Cash Flow
Information:
Cash Paid During the Periods For:
Interest Paid 0 93,188
------- -------
In connection with the payment by the
Company of Monthly Maintenance in its
Subsidiary, the Company received credit
for rental income paid directly to the
Subsidiary by the Company's tenants 0 194,371
------- -------
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNT PRINCIPLES
(a) Organization and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Orion
Diversified Technologies, Inc., "Orion and the Company" and its 86% owned
subsidiary, Netherland Gardens Owners, Inc., "NGO". The financial statements of
Orion and NGO are being consolidated at April 30, 1996 as a result of Orion's
control of NGO's Board of Directors, see Note 2.As indicated in Note 2, Orion
divested itself of NGO on January 11, 1996. All significant intercompany
balances and transactions have been eliminated in consolidation.
The Company, through a contractual relationship, sells semiconductors, on a
highly limited basis, to independent distributors and to original equipment
manufacturers or other end-users. For the three years ended April 30, 1996, the
Company had minimal revenues from these sources. The majority of the financial
statement balances relate to NGO, since Orion had minimal operations and filed
for bankruptcy in prior years (See Note 6).
(b) Going Concern Basis of Presentation
The accompanying consolidated financial statements have been prepared on a going
concern basis which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business.
Orion has not realized any material revenues for the three years ended April 30,
1996, and the consolidated results of operations for the year ended April 30,
1995 reflect a loss of $223,034. The Company also is entirely supported by its
majority shareholder. These factors raise substantial doubt about the Company's
ability to continue as a going concern.
Management's long standing plans to remedy these conditions involves a business
combination with a profitable private company in a reverse merger transaction.
The Company further anticipates an eventual improvement in liquidity through the
exercise of the Company's Class A and B Warrants (Note 8).
(c) Inventories
Inventories, which are located on the premises of a non-affiliated party
pursuant to a revenue sharing agreement, are comprised of semiconductors and are
held for resale, are stated at the lower of cost (first-in first-out method) or
market as of April 30, 1993. Physical inventories were not observed at April 30,
1996 and 1995.
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997
(d) Land, Buildings and Equipment
Land, buildings and equipment are carried at cost. Expenditures for
maintenance, repairs and minor renewals are charged to operations; expenditures
for betterments are capitalized. Depreciation and amortization are computed
using the straight-line method.
(e) Excess of Cost Over Net Assets Acquired
Excess of costs over net assets acquired are being amortized of five (5) years,
which is management's estimate of the time period needed to sell the apartments
shares in its co-operative subsidiary.
(f) Income Taxes
The company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" which requires the
use of the "liability method" of accounting for income taxes. Accordingly,
deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and liabilities, using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Current income taxes are based on the year's taxable income for
Federal and State income tax reporting purposes.
(g) Allowance for Bad Debts
The Company has made a specific provision related to the receivable from Michael
Associates, the non-affiliated former owner of NGO, based on current
circumstances. On January 11, 1996, Orion conveyed NGO back to Michaels
Associates. See Note 2.
(h) Net Loss Per Share of Common Stock
Net loss per share of common stock is based on the loss for each period divided
by the weighted average number of shares of common stock outstanding during each
period. Common stock equivalents have been excluded from the computation of net
loss per share of common stock since the result would be anti-dilative.
(i) Reclassification
Certain reclassifications have been made to the 1993 financial statements in
order to conform to the 1996 and 1995 presentation.
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1996
NOTE 2
ACQUISITION AND DIVESTITURE OF NETHERLAND GARDENS OWNERS, INC.
Agreement
On February 25, 1993, the Company acquired from Michaels Associates,
("Michaels") then an unrelated party, its interest in a 59 unit cooperative
housing corporation located in White Plains, New York.
The Company exchanged 500,000 shares of restricted common stock with an assigned
value of $5.00 per share for all the shares held by Michael. Such shares
represented an 86% interest in the cooperative housing corporation. The Company
also agreed to pay brokers or finders commissions in the amount of 50,000 shares
of restricted common stock, which represents 10% of the purchase price. The net
asset value at the date of acquisition approximated $2,600,000.
The Company's stock valuation in the transaction was based in part by values
determined in connection with the Company's Plan of Reorganization in the 1990
Chapter 11 Bankruptcy proceedings. The Plan of Reorganization provided for the
issuance of unrestricted shares to the unsecured creditors as follows: One (1)
share of common stock together with one (1) Class A Warrant, and one (1) Class B
Warrant for every $5.00 of debt. In the purchase for the equity ownership in NGO
it was agreed between the parties that such $5.00 value for each share be
maintained without giving consideration in such valuation to the Class A and
Class B Warrants.
The shares acquired from Michaels was subject to a lien of $390,000, which was
to be satisfied by Michaels. Since Michaels' lien holder had possession of the
shares to be tendered to the Company, the Company held Michaels' 500,000 shares
in escrow until the NGO shares were received. Additionally, the agreement with
the lien holder stipulated that upon sale of the apartment units, the lien
holder was to receive $12,500 for the first eight (8) units sold, and $25,000
per unit thereafter. As of April 30, 1993, ten (10) apartment were sold. No
additional apartment units were sold from May 1, 1993 through January 11, 1996.
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997
NOTE 2
ACQUISITION OF NETHERLAND GARDENS OWNERS, INC.(continued)
Agreement
The acquisition agreement further provided that Michaels, designees were to have
two seats out of three on the Board of Directors of the Company. It was further
agreed that the Company's single Director was to have a weighted vote of three
Directors on all issues except matters related to NGO and on such matters,
Michaels was to have two votes on the Board of Directors and the Company was to
have one vote. On November 22, 1993 the acquisition agreement was amended
eliminating Michaels favorable two vote status in matters concerning NGO.
Accounting
The Michaels acquisition was accounted for under the purchase method.
Accordingly, for the year ended April 30, 1993, the Company's operations reflect
its pro rata share of operations from the date of acquisition, February 25, 1993
to April 30, 1993.
Pro-forma Supplementary Information
The results of operations for the preceding period had the acquisition taken
place at the beginning of fiscal year April 30, 1993 would be the following:
Revenue $ 338,080
-----------
Net Loss $ (322,086)
-----------
Loss Per Share $ (0.22)
-----------
Weighted Average Shares Outstanding 1,459,058
Net loss included amortization of excess of cost over net assets acquired of
$8,768.
The above data combined the results of the cooperative housing unit as of
December 31,
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997
NOTE 2
ACQUISITION AND DIVESTITURE OF NETHERLAND GARDENS OWNERS, INC.(continued)
Pro-forma Supplementary Information
with Orion's results as of April 30. The results of operations would not be
materially different if the Company provided financial data on a fiscal year
basis.
In light of the continuing losses of NGO and the lack of cash distributions, the
Company divested NGO as of January 11, 1996.
Organization and Revenues
Netherland Gardens Owners, Inc. is a cooperative housing corporation
incorporated in the State of New York on December 8, 1986. The Cooperative
Corporation acquired the property from Michaels January 4, 1990. The Corporation
owns two buildings known as Netherland Gardens Apartments located in White
Plains, New York. The apartments consist of 58 residential units and a
superintendent's apartment. The primary purpose of the Cooperative Corporation
was to manage the operations of Netherland Gardens Apartments and maintain the
common areas.
Orion, through its investments in the Cooperative Corporation, owned 48 units
through January 11, 1995 and received rental income from the occupied units
through that date.
Divestiture
On January 11, 1996, and as described in Item 1 of this Report, the Company
divested itself of its equity interest in NGO and received 450,000 of the
550,000 shares it originally issued in connection with this acquisition in
February 1993.
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997
NOTE 3
Inventory
In March 1994, the Company entered into an agreement with New Jersey Semi
Conductor Products, Inc., a non-affiliated New Jersey Corporation "NJSC",
whereby NJSC will continue to test, clean, mark, package and offer the Company's
entire semiconductor inventory for sale. Proceeds from the sale of the inventory
will be divided equally, except for finders fees that have not been determined
between the parties, which will be paid out of Orion's profit share. Orion
received a $5,000 advance from NJSC against future sales. Since July 1995, no
sales proceeds have been received by the Company. Accordingly, and in light of
NJSC's failure to sort the inventory as required, such inventory could not be
physically observed since identification items and quantities were destroyed
during the relocation of said inventory.
NOTE 4
Land. Buildings and Equipment
Land and buildings are recorded at NGO's cost of $4,970,350 which is based upon
the contract of exchange outlining the terms of NGO's acquisition of such
property from Michael Associates. in said contract, $4,500,000 was allocated to
the building and the remaining amount to land. As a result, the carrying value
of the land and buildings was stepped up by $3,255,258 over the sponsor's
historical cost. Land, buildings and equipment consist of the following as of
April 30:
1997 1996
---- ----
Land 0 0
Buildings 0 0
Equipment 0 0
- -
Less: Accumulated 0 0
- -
Depreciation 0 0
The buildings were depreciated over 27 1/2 years using the straight-line method.
Repairs for the years ended April 30, 1996 and 1995 amounted to 0 and $26,458
respectively.
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997
NOTE 5
Accounts Payable and Accrued Expenses
1997 1996
---- ----
Trade Payable $ 0 $ 0
Professional Fees 0 0
Real Estate Taxes 0 0
Advance Against Inventories 5,000 5,000
------ ------
$5,000 $5,000
NOTE 6
Payroll Taxes - Chapter 11
In connection with the Plan of Reorganization, payroll taxes were due within six
years from April 23, 1986 the date of assessment. Accordingly, the tax
liability, which includes accrued interest, is classified as current.
NOTE 7
Common Stock Purchase Warrants
In accordance with the Plan of Reorganization, 905,262 redeemable Class A and
Class B Purchase Warrants were issued between September 19, 1990 and December
30, 1990. Each Warrant entitles the holder to purchase one "new" share of the
Company' stock for each Warrant that is exercised. The exercise price of the
Class A and Class B Warrants are $2.50 and $3.50 respectively. The expiration
date for both classes of Warrants was extended to December 31, 1998 by the Board
of Directors.
As of April 30, 1997 and 1996, 903,761 Class A and 905,262 Class B Warrants were
outstanding.
NOTE 8
Income Taxes
Effective May 1, 1991, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". Income taxes are
provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes related
primarily to differences between the financial and tax basis of assets and
liabilities.
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997
NOTE 8
Income Taxes (continued)
The Company's subsidiary is taxed only on non-cooperative income, such as
interest income, The subsidiary files tax returns on a separate return basis.
Earnings from cooperative derived sources may be excluded from taxation, if the
Company elects to refund to shareholders, on a-pro rata basis, the excess income
within eight and a half (8 1/2) months after the close of the corporation's tax
year.
The parent company net operating loss carryforwards and their
expiration dates are as follows:
Year of Expiration Amount
------------------ ------
1997 $ 83,000
1999 128,000
2000 84,000
2001 1,000
---------
Thereafter, expiring 2003-2010 $ 666,260
---------
$ 962,260
NOTE 10
Related Party Transactions
a) Transactions with Management
The Company has agreed to certain transactions with Joseph Petito, the
company's President, Chief Operating Officer, Chairman of the Board and majority
shareholder. Such transactions are described below:
1. Facilities
From March 1, 1992 through June 1995, the Company maintained its executive
offices and facilities at 659 Old Willets Path, Hauppauge, New York.
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997
1. Facilities (continued)
The rent for this facility was paid, on a month to month basis, to, Adaer
Berkeley Colletone, Inc., a corporation controlled by Mr. Petito. The Company
paid a rental of $1,895 per month, with a proportionate share, from March 1,
1992 through April 30, 1995 of any tax increase from its base tax year of
1991-1992. The rent paid to Mx. Petito was the same amount as paid by Mr. Petito
to the facility's landlord. Rent expense for the years ended April 30, 1994 and
1993 amount to $22,500 and $21,862, respectively.
In June 1995, and as a result of a fire at its Hauppauge facility, the Company
moved to its present facility where it sub-leases space, rent free from Joseph
Petito.
b) Compensation and Other Costs
The Company has had minor sales and no other income since the relocation of its
offices. As a result, virtually all of the Company's operating expenses have
been advanced by Mr. Petito for the four years ended April 30, 1997.
Costs advanced to the Company by Mr. Petito from May 1, 1992 through April 30,
1995 amounted to $64,195.
On June 2, 1990, the Board of Directors agreed to provide compensation to Mr.
Petito, at the rate of $1,500 per week. On May 2, 1994, Mr. Petito agreed to
forego the $1,500 weekly compensation until the Company shows a significant
upward trend in its results of operations. As the Company has had minimal
revenues, compensation of $78,000 from the year ended April 30, 1994 and costs
of $64,195, for the three (3) years ended April 30, 1995 were not paid which
amounted to approximately $38,318 as at April 30, 1995.
Both the compensation and other costs owed as of April 30, 1993 were liquidated
in accordance with the following:
On June 2, 1990, The Board of Directors approved that the liquidation of such
outstanding indebtedness can be made by the issuance of the Company's restricted
common stock on the basis of two shares for every $1.00 of debt or a chase
reimbursement at Mr . Petito's option. At April 30, 1993, Mr. Petito converted
$418,817 of debt to 837,634 shares, respectively.
<PAGE>
ORION DIVERSIFIED TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997
c) Due to Officer
The details of the Due to Officer Account are as follows:
Salary Advances Total
------ -------- -----
Balance - April 30, 1993 $ 0 $ 0 $ 0
Additional 78,000 22,089 100,089
Balance - April 30, 1994 $ 78,000 22,089 100,089
Additions - April 30, 1995 0 16,229 6,229
April 30, 1996 0 7,394 7,394
------------------------------
Balance April 30, 1996 $ 45,718 $123,372
Additions - April 30, 1997 150 150
-------- -------- --------
$ 78,000 $ 45,868 123,828
NOTE 11
Future Major Repairs and Replacements
See Note 2 Regarding Divestiture.
