-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RtxgtVUNgNLfH2AzmPSxIZoiYbfW5rml5domXMy+xayKkuln/XjQzQfJpiEa5kvm zGkfVo2Lq+Dzv7oD9Kxhzg== 0001094891-01-500017.txt : 20010418 0001094891-01-500017.hdr.sgml : 20010418 ACCESSION NUMBER: 0001094891-01-500017 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORION ACQUISITION CORP II CENTRAL INDEX KEY: 0001011835 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 133863260 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB40 SEC ACT: SEC FILE NUMBER: 000-20837 FILM NUMBER: 1603921 BUSINESS ADDRESS: STREET 1: 100 WILSHIRE BOULEVARD SUITE 1750 STREET 2: 13TH FL CITY: SANTA MONICA STATE: CA ZIP: 90401 BUSINESS PHONE: 2123911392 MAIL ADDRESS: STREET 1: 100 WILSHIRE BOULEVARD SUITE 1750 CITY: SANTA MONICA STATE: CA ZIP: 90401 10KSB40 1 orion_10ksb40-123100.txt ANNUAL REPORT FOR 123100 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 Commission File Number 0-20837 Orion Acquisition Corp. II (Name of Small Business Issuer in Its Charter) Delaware 13-3863260 (State of Incorporation) (Small Business Issuer I.R.S. Employer I.D. Number) 401 Wilshire Boulevard - Ste. 1020 Santa Monica, California 90401 (Address of principal executive offices) (Zip Code) (310) 526-5000 (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 per share Redeemable Class A Common Stock Purchase Warrants Redeemable Class B Unit Purchase Warrants 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 registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No__ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is 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. Yes X No___ Issuer's revenues for the fiscal year ended December 31, 2000 were $94,488. As of March 15, 2001, the aggregate market value of the common stock held by non-affiliates of the Registrant was approximately $570,878. As of March 15, 2001, there were 1,102,157 shares of Common Stock, $.01 par value per share, outstanding. Transitional Small Business Disclosure Format (check one): Yes ___ No X Documents Incorporated by Reference: None. PART I ITEM 1. DESCRIPTION OF BUSINESS General Orion Acquisition Corp. II was organized on October 19, 1995 to acquire by purchase, merger, combination or otherwise an operating business. There is no restriction on the means of acquisition or the industry in which the target business operates. Since its inception, Orion has not engaged in any substantive commercial business. Its sole activities have been to evaluate and select a suitable target business and to structure, negotiate and consummate a business combination with a target business. Background of Orion. Orion was originally organized as a Special Merger and Acquisition Allocated Risk Transaction(R) company, known as SMAART(R). This type of company has a number of unusual stockholder protections. Among other things, these include, the escrow of a significant portion of the proceeds of the initial public offering, the right of shareholders to approve the first business combination and the escrow of shares issued prior to going public. In April 1999, Orion experienced a complete change of directors and change of management as a result of a consent action by a group of stockholders owning 51% of the outstanding shares. Later in the year, pursuant to a vote of the stockholders at a special meeting, the stockholders approved a change in the certificate of incorporation to eliminate the requirement that a business combination be approved by the stockholders and approved the termination of the escrow fund. All the other characteristics of the SMAART(R), except the escrow of the shares issued prior to going public, also were eliminated. In addition to the corporate changes, the escrow of funds received in the initial public offering was terminated. In July 1999, the amount of $9.00 per share were distributed as a return of capital and dividend to holders of shares issued in the initial public offering to the then holders of record on July 22, 1999. In November 1999, after the stockholder approval of the termination of the escrow fund, the remaining amount held in escrow was distributed to Orion. Those funds were used to pay accumulated and unpaid taxes and the other obligations of Orion. Since then, those funds have been used for the working capital of Orion and will be used to pay a portion of any expenses of a business combination. Business Objective The management of Orion intends to identify a target business and effect a business combination with a target business. It is anticipated that any business combination will be by negotiation rather than hostile takeover. At this time, Orion does not have a schedule of when it will be able to initiate or consummate a specific business combination. Management has substantial flexibility in identifying and selecting a prospective target business. In evaluating a prospective target business, management will consider, among other factors, the following: (i) the costs associated with effecting the business combination; 2 (ii) the amount of the equity interest it will be able to acquire in the business and opportunity for obtain control; (iii) the growth potential of the target business; (iv) the experience and skill of the management of the target business and availability of additional personnel for the target business; (v) the current and anticipated capital requirements of the target business; (vi) the competitive position of the target business in its industry; (vii) the stage of business development of the target business; (viii) the degree of current or the potential market acceptance of the products or services of the target business; (ix) the existence of any proprietary features or intellectual property of the target business; (x) the overall financial condition of the target business; and (xi) the regulatory environment in which the target business operates. In connection with its search for an acquisition opportunity, Orion may engage investment banking firms to help it identify and approach target businesses. Moreover, in evaluating any target business, management will consider retaining an independent investment banking firm which is a member in good standing of the NASD to assist the Company in appraising, structuring and negotiating a potential business combination. In connection with its evaluation of a prospective target business, management will conduct a due diligence review which will encompass, among other things, meeting with incumbent management, inspecting the facilities, and reviewing the financial, legal and other information which will be made available to Orion. The time and costs required to select and evaluate a target business (including conducting a due diligence review) and to structure and consummate the business combination (including negotiating relevant agreements and preparing requisite documents for filing pursuant to applicable securities laws and state "blue sky" and corporation laws) will not be ascertainable with any degree of certainty until consummation of the business combination. Any costs incurred in connection with the identification and evaluation of a prospective target business with which a business combination is not ultimately consummated will result in an expense to Orion. Orion will use its current working capital and capital resources to consummate a business combination. In addition, because the resources of Orion are not sufficient to fund a business combination, it will have to raise additional capital. The capital may be in the form of equity or debt, and will likely be based solely on the business operation and financial condition of the target business. Therefore, it is not possible at this time to determine the amount of capital that will be needed or available for a business combination. There currently are no limitations on Orion's ability to privately obtain funds for a business combination. Nonetheless, Orion's limited resources and lack of 3 operating history may make it difficult to obtain funds. Because of certain SEC interpretations and related rules, Orion does not believe it can publicly raise funds prior to a business combination with an operating company. The amount and nature of any funding will depend on numerous considerations, including Orion's capital requirements, potential lenders' evaluation of Orion's ability to meet debt service on borrowings and the then prevailing conditions in the financial markets, as well as general economic conditions. Orion does not have any arrangements with any bank or financial institution to secure additional financing, and there can be no assurance that such arrangements if required will be obtainable or otherwise in the best interests of Orion. The inability of Orion to obtain the funds required to effect a business combination, or to provide funds for an additional infusion of capital into a target business, may have material adverse effects on Orion's business prospects, including the ability to effect a business combination. Employees Orion does not have any employees. ITEM 2. DESCRIPTION OF PROPERTY Orion's executive office is located at 401 Wilshire Boulevard, Suite 1020, Santa Monica, California 90401, and its telephone number is (310) 526-5004. Pursuant to an oral agreement, MDB Capital Group, LLC., a limited liability company controlled by Christopher A. Marlett, Anthony DiGiandomenico and James D. Bowyer, each a stockholder, officer and director of Orion, has agreed that it will make office space and services available to Orion, as may be required at this time and in the near future. Orion does not pay any amount for the office space or services. Orion believes that this facility is adequate to meet its needs in the foreseeable future pending the consummation of a business combination. ITEM 3. LEGAL PROCEEDINGS On July 1, 1999, a Class B Warrant holder of Orion brought an action ("July Action") against Orion, its former directors and certain others. On January 31, 2000, the plaintiff filed a notice dismissing the July Action without prejudice. On January 28, 2000 the court ordered the notice of dismissal. The Company and the plaintiff agreed that Orion will make an exchange offer to all holders of the Class B Warrants. The exchange offer must be made after Orion completes its first business combination of a target company that results in the acquisition of one or more companies with operating businesses and results in Orion having assets in excess of $5,000,000. The terms of the exchange offer will require each holder to pay the $.125 exercise price of the Class B Warrant and surrender the warrant for one share of common stock, one Class A Warrant and one Right. The Right will provide for the issuance of additional shares of common stock based on a formula in the event that Orion makes an acquisition or consummates a merger and the post transaction company does not meet the specified targets of a $7,000,000 net worth immediately after the transaction and a minimum common stock price of $5.75 for ten days during the two year period following the transaction, subject to certain adjustment, terms and conditions. On October 31, 2000, Orion filed with the Supreme Court of the State of New York, County of New York, a summons and complaint in an action entitled Orion Acquisition Corp. II v. Mentmore Holdings Corporation, Mentmore Holdings, Inc., Richard L. Kramer, William L. Remley, Richard C. Hoffman, Robert D. 4 Frankel, J. Thomas Chess, and Michael D. Schenker. Messrs. Kramer, Remley, Hoffman, Frankel and Chess are former directors and/or officers of Orion. Messrs. Remley and Kramer are or were officers and/or directors of one or more of the Mentmore defendants. Mr. Hoffman is or was an officer of one or more of the Mentmore defendants. In the complaint, Orion alleges a series of causes of action, including a claim against the former Orion directors for breach of fiduciary duty in connection with the diversion of a corporate opportunity, and against other defendants for aiding and abetting the claimed breach of fiduciary duty and duty of loyalty. The defendants have filed answers in which they deny the material allegations of Orion's complaint. The action shortly will be entering the discovery phase. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information The common stock, Class A Warrants and Class B Warrants are traded in the over-the- counter market and quoted on the OTC Bulletin Board under the symbols MTMR, MTMRW, and MTMRZ. The following table sets forth the range of high and low closing trading prices for the common stock, Class A Warrants, and Class B Warrants for the last two fiscal years. The OTC Bulletin Board is an inter-dealer automated quotation system sponsored and operated by the NASD for equity securities not included in the Nasdaq System. The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily reflect actual transactions. 5
Class A Class B Common Stock Warrants Warrants High Low High Low High Low Year Ended December 31, 2000: First Quarter.... 1.375 1.375 .156 .156 .031 .031 Second Quarter... 1.437 1.437 .156 .156 .640 .640 Third Quarter.... -0- -0- -0- -0- -0- -0- Fourth Quarter... 1.125 1.125 .062 .062 .125 .125 Year Ended December 31, 1999: First Quarter.... 10.125 8.00 N/A N/A .03125 .21875 Second Quarter... 11.00 8.50 N/A N/A .15625 .15625 Third Quarter.... 7.00 1.00 N/A N/A N/A N/A Fourth Quarter... 1.375 1.0625 N/A N/A N/A N/A
Holders As of March 15, 2001, there were 30 holders of record of the common stock and two holders of record of the Class A Warrants and one holder of record of the Class B Warrants. Since many of the securities are held in street name, Orion believes that there is a substantial number of beneficial holders of the securities. Dividends On July 26, 1999 the Company completed a distribution of $9.00 per share to holders of shares of common stock originally sold in the Company's initial public offering dated July 2, 1996 which represented both a return of capital and a dividend. Orion does not expect to pay any additional dividends prior to the consummation of a business combination, and thereafter anticipates that for the foreseeable future any earnings will be retained for use in its business. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Forward Looking Statements When used in this Form 10-KSB and in future filings by Orion with the Securities and Exchange Commission, the words or phrases "will likely result, "management expects," or "the company expects," "will continue," "is anticipated," "estimated" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties, some of which are described below, that could cause actual results to differ materially 6 from historical earnings and those presently anticipated or projected. Orion has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements. The selected financial information for the year ended December 31, 1999, is derived from the financial statements of Orion which have been audited by BDO Seidman, LLP. The selected financial information for the year ended December 31, 2000, is derived from the financial statements of Orion which have been audited by Singer Lewak Greenbaum & Goldstein LLP, Orion's independent auditors. This information should be read in conjunction with the financial statements and related notes and other financial information included herein.
Statement of Operations Data 2000 1999 - ---------------------------- ---- ---- Interest Income................................. 94,488 255,344 General and administrative expenses............. (148,844) (85,281) Provision for (benefit from) taxes.............. (26,653) 74,303 Net Income (loss)............................... (27,703) 95,760 Weighted average common shares Outstanding..................................... 1,013,758 890,000 Balance Sheet Data: Total Assets.................................... 2,234,764 2,045,862 Total liabilities............................... 40,848 121,263 (Deficit) earnings accumulated during development stage............................... (20,150) 7,553 Stockholders' equity............................ 2,193,916 1,924,599
Orion is a development stage company, and to date its efforts have been limited to organizational activities, consummating an initial public offering and seeking a business combination. Orion has not yet consummated a business combination. Accordingly, Orion will not achieve any revenues (other than investment income) until, at the earliest, the consummation of a business combination. Between January and April of 1999, a group of stockholders acquired approximately 51% of the outstanding common stock of Orion. On April 30, 1999, by consent action, this group of stockholders elected a new board of directors and officers of Orion effecting a complete change in control of Orion and in the management of the Company. On October 22, 1999, a special meeting of the stockholders was held, and pursuant to a solicitation of proxies, the stockholders approved a change in the certificate of incorporation to eliminate the requirement that a business combination be approved by the outstanding common stock and a proposal to terminate the escrow fund and distribute the amounts therein to Orion. On November 3, 1999, after stockholder approval of the termination of the escrow fund, the funds then held in escrow of $2,137,243 were distributed to Orion. Those funds have been used to pay accumulated and unpaid taxes and other obligations of Orion. The remaining funds will be used to fund the ongoing expenses of Orion. These funds may also be used to pay a portion of the costs of any business combination. Orion currently has its executive office at the location of MDB Capital Group LLC whose principals are members of the board of directors of Orion. MDB 7 Capital Group has agreed to make office space and services available to Orion, as may be required at this time and in the near future. Orion does not pay any amount for these services. At December 31, 2000, Orion had $2,177,683 in cash and short term U.S. Treasury Bills. Orion will continue to invest its assets in U.S. Treasury bills and cash until such time as assets are needed for a business combination or acquisition. Orion has not incurred any debt in connection with its organizational activities. No cash compensation is currently or will be paid to any officer director until after the consummation of a business combination. Since the role of present management after a business combination is uncertain, Orion has no ability to determine what remuneration, if any, will be paid to such persons after a business combination. Orion believes it has more than adequate capital to fund its operations pending a business combination. Orion will use its current working capital and capital resources to consummate a business combination. In addition, because the resources of Orion are not sufficient to fund a business combination, it will have to raise additional capital. The capital may be in the form of equity or debt, and will likely be based solely on the business operation and financial condition of the target business. Therefore, it is not possible at this time to determine the amount of capital that will be needed or available for a business combination. There currently are no limitations on Orion's ability to privately obtain funds for a business combination. Because of certain SEC interpretations and related rules, Orion does not believe it can publicly raise funds prior to a business combination with an operating company. Orion's limited resources and lack of operating history may make it difficult to obtain funds. The amount and nature of any funding will depend on numerous considerations, including Orion's capital requirements, potential lenders' evaluation of Orion's ability to meet debt service on borrowings and the then prevailing conditions in the financial markets, as well as general economic conditions. Orion does not have any arrangements with any bank or financial institution to secure additional financing, and there can be no assurance that such arrangements if required will be obtainable or otherwise in the best interests of Orion. The inability of Orion to obtain the funds required to effect a business combination, or to provide funds for an additional infusion of capital into a target business, may have material adverse effects on Orion's business prospects, including the ability to effect a business combination. 8 ITEM 7. FINANCIAL STATEMENTS ORION ACQUISITION CORP. II (A CORPORATION IN THE DEVELOPMENT STAGE) CONTENTS PAGE Report of Singer, Lewak Greenbaum & Goldstein LLP, independent certified public accountants.......................................... F-1 Report of BDO Seidman, LLP, independent certified public accountants.. F-2 Financial statements: Balance Sheet................................................ F-3 Statements of Operations..................................... F-4 Statements of Stockholders' Equity........................... F-5 Statements of Cash Flows..................................... F-7 Notes to financial statements................................ F-9 9 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Orion Acquisition Corp. II We have audited the accompanying balance sheet of Orion Acquisition Corp. II (a development stage company) as of December 31, 2000, and the related statements of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We have not audited the balance sheets and the statements of operations, stockholders' equity, and cash flows for the periods from October 19, 1995 (inception) to December 31, 1999, which constituted retained earnings aggregating to $7,553. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, 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. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Orion Acquisition Corp. II as of December 31, 2000, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /S/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP Los Angeles, California January 17, 2001 F-1 Report of Independent Certified Public Accountants Board of Directors Orion Acquisition Corp. II Los Angeles, California We have audited the statement of income, stockholders' equity, and cash flows of Orion Acquisition Corp. II (a corporation in the development stage) for the year ended December 31, 1999, and the statements of income, stockholders' equity, and cash flows for the period from October 19, 1995 (date of inception) to December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of the Company's operations and its cash flows for the year ended December 31, 1999 and for the period from October 19, 1995 (date of inception) to December 31, 1999, in conformity with accounting principles generally accepted in the United States of America. /S/ BDO Seidman, LLP BDO Seidman, LLP Los Angeles, California February 10, 2000 F-2
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET December 31, 2000 - ----------------------------------------------------------------------------- ASSETS Assets Cash $ $ 585,480 Investments - held to maturity 1,592,203 Income taxes receivable 27,232 Deferred income taxes 221 Other assets 29,628 ------------ Total assets $ 2,234,764 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accrued expenses $ 40,848 ------------ Total current liabilities 40,848 ------------ Commitments and contingencies Stockholders' equity Preferred stock, $0.01 par value 1,000,000 shares authorized 110 shares issued and outstanding 1 Common stock, $0.01 par value 10,000,000 shares authorized 1,102,157 shares issued and outstanding 11,022 Additional paid-in capital 2,203,043 Deficit accumulated during the development stage (20,150) ------------ Total stockholders' equity 2,193,916 ------------ Total liabilities and stockholders' equity $ 2,234,764 ============
The accompanying notes are an integral part of these financial statements. F-3
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS For the Years Ended December 31, 2000 and 1999 and for the Period from October 19, 1995 (Inception) to December 31, 2000 - --------------------------------------------------------------------------------------------- For the Period from October 19, For the Year Ended 1995 December 31, (Inception) to ------------------------- December 31, 2000 1999 2000 ------------ ----------- ------------ Operating expenses General and administrative expenses $ (148,844) $ (85,281) $ (803,366) Stock-based compensation expense - - (100,000) ------------ ----------- ------------ Total operating expenses (148,844) (85,281) (903,366) ------------ ----------- ------------ Loss from operations (148,844) (85,281) (903,366) ------------ ----------- ------------ Other income (expense) Interest income 94,488 255,344 1,483,680 Interest expense - - (57,694) ------------ ----------- ------------ Total other income (expense) 94,488 255,344 1,425,986 ------------ ----------- ------------ Income (loss) before provision for (benefit from) income taxes (54,356) 170,063 522,620 Provision for (benefit from) income taxes (26,653) 74,303 267,129 ------------ ----------- ------------ Net income (loss) $ (27,703) $ 95,760 $ 255,491 ============ =========== ============ Basic and diluted Income (loss) per common share $ (0.03) $ 0.11 ============ =========== Weighted-average common shares outstanding 1,013,758 890,000 ============ ===========
The accompanying notes are an integral part of these financial statements. F-4
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF STOCKHOLDERS' EQUITY For the Period from October 19, 1995 (Inception) to December 31, 2000 - ------------------------------------------------------------------------------------------------ Common Stock Subject to Preferred Stock Common Stock Possible Redemption Shares Amount Shares Amount Shares Amount ------ ------ -------- -------- -------- ----------- Balance, October 19, 1995 (inception) - $ - - $ - - $ - Issuance of founders share 16,500 165 ------ ------ -------- -------- -------- ----------- Balance, December 31, 1995 - - 16,500 165 - - Issuance of founders shares - - 58,500 585 - - Sale of private placement shares - - 15,000 150 - - Sale of convertible preferred stock 110 1 - - - - Sale of 800,000 shares, net of underwriting discounts and offering costs - - 640,000 8,000 160,000 1,600,000 Accretion to redemption value of stock - - - - - 42,118 Net income - - - - - - ------ ------ ---------- -------- -------- ----------- Balance, December 31, 1996 110 1 730,000 8,900 160,000 1,642,118 Issuance of options - - - - - - Accretion to redemption value of common stock - - - - - 90,122 Net income - - - - - - ------ ------ ---------- -------- -------- ----------- Balance, December 31, 1997 110 1 730,000 8,900 160,000 1,732,240 Accretion to redemption value of common stock - - - - - 85,484 Net income - - - - - - ------ ------ ---------- -------- -------- ----------- Balance, December 31, 1998 110 1 730,000 8,900 160,000 1,817,724 Elimination of redemptive common stock provision - - 160,000 - (160,000) (1,600,000) Reversal of accretion to redemptive value of common stock - - - - - (217,724) Dividend Liquidating dividend - - - - - - Net income - - - - - - ------ ------ ---------- -------- -------- ----------- Balance, December 31, 1999 110 1 890,000 8,900 - - Sale of common stock - - 212,157 2,122 - - Net loss - - - - - - ------ ------ ---------- -------- -------- ----------- Balance, December 31, 2000 110 $ 1 $1,102,157 $ 11,022 $ - $ - ====== ====== ========== ======== ======== =========== (Table continued on next page) The accompanying notes are an integral part of these financial statements. F-5 (Continued) ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF STOCKHOLDERS' EQUITY For the Period from October 19, 1995 (Inception) to December 31, 2000 - ---------------------------------------------------------------------------- Deficit Accumulated Additional during the Paid-In Development Capital Stage Total ---------- -------- ---------- Balance, October 19, 1995 (inception) $ - $ - $ - Issuance of founders share 1,485 1,650 ---------- -------- ---------- Balance, December 31, 1995 1,485 - 1,650 Issuance of founders shares 5,265 - 5,850 Sale of private placement shares 7,350 - 7,500 Sale of convertible preferred stock 10,999 - 11,000 Sale of 800,000 shares, net of underwriting discounts and offering costs 7,107,405 - 8,715,405 Accretion to redemption value of stock - (42,118) - Net income - 42,651 42,651 ---------- -------- ---------- Balance, December 31, 1996 7,132,504 533 8,784,056 Issuance of options 100,000 - 100,000 Accretion to redemption value of common stock - (90,122) - Net income - 4,266 4,266 ---------- -------- ---------- Balance, December 31, 1997 7,232,504 (85,323) 8,888,322 Accretion to redemption value of common stock - (85,484) - Net income - 140,517 140,517 ---------- -------- ---------- Balance, December 31, 1998 $7,232,504 (30,290) 9,028,839 Elimination of redemptive common stock provision 1,600,000 - - Reversal of accretion to redemptive value of common stock - 217,724 - Dividend (275,641) (275,641) Liquidating dividend (6,924,359) - (6,924,359) Net income - 95,760 95,760 ---------- -------- ---------- Balance, December 31, 1999 1,908,145 7,553 1,924,599 Sale of common stock 294,898 - 297,020 Net loss - (27,703) (27,703) ---------- -------- ---------- Balance, December 31, 2000 $2,203,043 $(20,150) $2,193,916 ========== ======== ==========
The accompanying notes are an integral part of these financial statements. F-6
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2000 and 1999 and for the Period from October 19, 1995 (Inception) to December 31, 2000 - -------------------------------------------------------------------------------------------------- For the Period from October 19, For the Year Ended 1995 December 31, (Inception) to -------------------------- December 31, 2000 1999 2000 ----------- ------------- ---------------- Cash flows from operating activities Net income (loss) $ (27,703) $ 95,760 $ 255,491 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Note discount amortization - - 37,500 Stock-based compensation expense - - 100,000 Increase in Other assets (12,568) (17,060) (29,628) Income taxes receivable (27,232) - (27,232) Deferred income taxes (221) - (221) Increase (decrease) in Accrued expenses (80,415) 49,578 40,848 ---------- ------------- ------------- Net cash provided by (used in) operating activities (148,139) 128,278 376,758 ---------- ------------- ------------- Cash flows from investing activities Sale of United States Treasury bills and other (increases) decreases in restricted cash - 9,088,622 - Purchase of United States Treasury bills - (1,506,615) (1,506,615) Sales or maturities of investments (85,588) - (85,588) ---------- ------------- ------------- Net cash provided by (used in) investing activities (85,588) 7,582,007 (1,592,203) ---------- ------------- ------------- Cash flows from financing activities Dividend - (7,200,000) (7,200,000) Issuance of units and redeemable Class B purchase warrants, net of offering costs - - 8,677,905 Issuance of unsecured promissory notes - - 100,000 Repayment of unsecured promissory notes - - (100,000) Proceeds from related party note - 35,000 35,000 Repayment of related party note - (35,000) (35,000) Issuance of founders' shares - - 7,500 Issuance of common stock 297,020 - 304,520 Issuance of convertible common stock - - 11,000 ---------- ------------- ------------- Net cash provided by (used in) financing activities 297,020 (7,200,000) 1,800,925 ---------- ------------- ------------- (continued) The accompanying notes are an integral part of these financial statements. F-7 (Continued) ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2000 and 1999 and - ----------------------------------------------------------------------------------------------- for the Period from October 19, 1995 (Inception) to December 31, 2000 - ----------------------------------------------------------------------------------------------- For the Period from October 19, For the Year Ended 1995 December 31, (Inception) to ------------------------- December 31, 2000 1999 2000 ------------ ----------- ----------- Net increase in cash $ 63,293 $ 510,285 $ 585,480 Cash, beginning of period 522,187 11,902 - ------------ ----------- ----------- Cash, end of period $ 585,480 $ 522,187 $ 585,480 ============ =========== =========== Supplemental disclosures of cash flow information Income taxes paid $ - $ 61,000 $ 121,000 ============ =========== ===========
The accompanying notes are an integral part of these financial statements. F-8 NOTE 1 - ORGANIZATION AND LINE OF BUSINESS Orion Acquisition Corp II (the "Company") was incorporated in Delaware on October 19, 1995 for the purpose of raising capital to fund the acquisition of an unspecified operating business. All activity to date relates to the Company's formation and fundraising. To date, the Company, as a development stage company, has not effected a Business Combination (as defined below). The registration statement for the Company's Initial Public Offering (the "Offering") became effective on July 2, 1996. The Company consummated the Offering, raising net proceeds of approximately $8,700,000 (see Note 5). The Company's management has broad discretion with respect to the specified application of the net proceeds of the Offering, although substantially all of the net proceeds of the offering were intended to be generally applied toward consummating a business combination with an operating business ("Business Combination"). NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Development Stage Enterprise ---------------------------- The Company is a development stage company as defined in Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises." The Company is devoting all of its present efforts to its formation and to fundraising, and its planned principal operations have not yet commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities. Estimates --------- The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Fair Value of Financial Instruments ----------------------------------- The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of the Company's financial instruments, including cash, United States Treasury bills, and accrued expenses, the carrying amounts approximate fair value due to their short maturities. F-9 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Loss per Share -------------- The Company calculates loss per share in accordance with SFAS No. 128, "Earnings per Share." Basic loss per share is computed by dividing the loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Because the Company has incurred net losses, basic and diluted loss per share are the same. The following potential common shares have been excluded from the computation of diluted net income (loss) per share for all periods presented because they are not exercisable until after a Business Combination: For the Year Ended December 31, ----------------------- 2000 1999 --------- ---------- Class A Warrants 880,000 880,000 Class B Warrants 390,100 390,100 Series A Convertible Preferred Stock 110,000 110,000 Stock option 10,000 10,000 Option to purchase Class A Warrants 100,000 100,000 Income Taxes ------------- The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. F-10 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounting for Stock-Based Compensation --------------------------------------- The Company accounts for its stock-based compensation plans in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. As such, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. On July 1, 1996, the Company adopted the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." Under SFAS No. 123, the Company must disclose certain pro forma information related to employee stock option grants as if the fair value-based method defined in SFAS No. 123 had been applied. Comprehensive Income -------------------- The Company presents comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting comprehensive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive income, which are excluded from net income, include foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. Comprehensive income is not presented in the Company's financial statements since the Company did not have any of the items of comprehensive income in any period presented. Recently Issued Accounting Pronouncements ----------------------------------------- In December 1999, the Securities and Exchange Commission staff released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition," to provide guidance on the recognition, presentation, and disclosure of revenue in financial statements. Changes in accounting to apply the guidance in SAB No. 101 may be accounted for as a change in accounting principle effective January 1, 2000. Management has not yet determined the complete impact of SAB No. 101 on the Company; however, management does not expect that application of SAB No. 101 will have a material effect on the Company's revenue recognition and results of operations. In March 2000, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation," (an Interpretation of Accounting Principles Bulletin Opinion No. 25 ("APB 25")) ("FIN 44"). FIN 44 provides guidance on the application of APB 25, particularly as it relates to options. The effective date of FIN 44 is July 1, 2000, and the Company has adopted FIN 44 as of that date. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Instruments and Certain Hedging Activities." This statement is not applicable to the Company. F-11 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recently Issued Accounting Pronouncements (Continued) ----------------------------------------- In June 2000, the FASB issued SFAS No. 139, "Rescission of FASB Statement No. 53 and Amendments to Statements No. 63, 89, and 121." This statement is not applicable to the Company. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125." This statement is not applicable to the Company. NOTE 3 - INVESTMENTS - HELD TO MATURITY A substantial portion of the assets of the Company are invested in United States Treasury bills having various original maturities of less than six months. The Company classifies these securities as held to maturity. Aggregate cost basis and market value of these securities as of December 31, 2000 totaled $1,592,203. No unrealized holding gains or losses have been realized. NOTE 4 - COMMITMENTS AND CONTINGENCIES Litigation ---------- On July 1, 1999, a Class B Warrant-holder of the Company brought suit against the Company, its former directors, and certain other third parties. On January 31, 2000, the plaintiff filed a notice dismissing the action without prejudice. On January 28, 2000, the court ordered the notice of dismissal. The Company and the plaintiff agreed that the Company will make an exchange offer to all holders of the Class B Warrants. Upon payment of an exercise price of $0.125 per Class B Warrant, each Class B Warrant will be exchanged for one share of common stock, one Class A Warrant, and one Right. The Right will provide for the issuance of additional shares of common stock based on a formula in the event that (a) the Company makes an acquisition or consummates a merger and (b) the post-transaction company does not meet the specified targets of a $7,000,000 net worth immediately after the transaction and a minimum common stock price of $5.75 for 10 days during the two-year period following the transaction, subject to certain adjustment, terms, and conditions. F-12 NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued) Litigation (Continued) ---------- The former directors of the Company who were named as defendants in the suit have made demand upon the Company for reimbursement of unquantified attorneys' fees incurred in defense of the suit prior to its voluntary dismissal. The former directors contend that they are entitled to reimbursement of attorneys' fees under a provision of Delaware corporate law. The Company is considering the reimbursement request. No accrual has been made for any potential reimbursement in the accompanying financial statements. On October 31, 2000, the Company filed with the Supreme Court of the State of New York, County of New York, a summons and complaint in an action entitled Orion Acquisition Corp. II v. Mentmore Holdings Corporation, Mentmore Holdings, Inc., Richard L. Kramer, William L. Remley, Richard C. Hoffman, Robert D. Frankel, J. Thomas Chess, and Michael Schenker. Messers. Kramer, Remley, Hoffman, Frankel, and Chess are former directors of the Company. Messrs. Remley and Kramer were officers and/or directors of one or more of the Mentmore defendants. Mr. Hoffman is or was an officer of one or more of the Mentmore defendants. In the complaint, the Company alleges a series of causes of action, including a claim against the Company's former directors for breach of fiduciary duty in connection with the diversion of a corporate opportunity, and against other defendants for aiding and abetting the claimed breach of fiduciary duty and duty of loyalty. The defendants have filed answers in which they deny the material allegations of the Company's complaint. The action will be entering the discovery stage. NOTE 5 - STOCKHOLDERS' EQUITY Private Placements ------------------ In January 1996, the Company completed a private offering to a limited group of investors which consisted, in the aggregate, of $100,000 in unsecured promissory notes bearing interest at 8% per annum. In addition, as part of this private placement, the Company also issued to the private placement investors 15,000 shares of common stock for $7,500. The notes were repaid as a result of the consummation of the Company's Offering, together with accrued interest totaling $3,533. The notes were discounted $37,500 for financial statement reporting purposes as a result of the fair value attributed to the common stock issued to the private placement stockholders. The effective interest rate on the notes was 45%. During June 2000, the Company issued 212,157 shares of common stock in exchange for proceeds of $297,020. Of the shares issued, 149,300 valued at $209,020 were issued to related parties. F-13 NOTE 5 - STOCKHOLDERS' EQUITY (Continued) Public Offering --------------- On July 9, 1996, the Company sold 800,000 units ("Units") in the Offering and 320,000 Class B redeemable common stock purchase warrants ("Class B Warrants"). Subsequently, on August 5, 1996, the underwriters exercised their over-allotment option to purchase 38,100 Class B Warrants. Each Unit consists of one share of the Company's common stock and one Class A Redeemable common stock purchase warrant ("Class A Warrants"). Each Class A Warrant entitles the holder to purchase from the Company one share of common stock at an exercise price of $9, commencing on the date of a Business Combination and expiring on the fifth anniversary from such date, and each Class B Warrant entitles the holder to purchase one Unit at an exercise price of $0.125, commencing on the date of a Business Combination and expiring on the first anniversary from such date. The Class A Warrants and Class B Warrants are redeemable, each as a class, in whole and not in part, at a price of $0.05 per warrant upon 30 days' notice at any time, provided that the Company has consummated a Business Combination and that the last sale price of the common stock on all 10 trading days ending on the day immediately prior to the day on which the Company gives notice of redemption has been $11 or higher. Convertible Preferred Stock --------------------------- The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting, and other rights and preferences as may be determined from time to time by the Board of Directors. The Company has outstanding 110 shares of Series A preferred stock, which is owned by an indirect affiliate. The purchase price for such shares was $11,000 in the aggregate, which was paid simultaneously with the consummation of the Offering. The Series A preferred stock is non-voting, and each share is convertible into 1,000 shares of common stock for a period of one year following the consummation of a Business Combination. Options ------- On July 9, 1996, the Company granted an option to purchase 100,000 Units to a Delaware corporation which is affiliated with two officers of the Company. The option is exercisable for a period of three years from the date of a Business Combination at an exercise price of $12.50 per Unit. The option is fully vested; however, the option will be canceled if these officers cease to serve as directors or executive officers of the Company prior to the Business Combination. The shares may be issued upon exercise of the option and underlying warrants may not be sold or otherwise transferred for 120 days subsequent to the first Business Combination. F-14 NOTE 5 - STOCKHOLDERS' EQUITY (Continued) Options (Continued) ------- Effective January 10, 1997, an investment bank engaged to assist the Company was granted an option to purchase 10,000 shares of common stock, par value $0.01 per share, owned by the above affiliated company at a purchase price of $0.10 per share. The Company recorded a non-cash charge of $100,000 that represents the fair value of the option at the date of grant as calculated using the Black-Scholes option pricing model. Warrants -------- In connection with the Offering, the Company issued warrants to the underwriters for 80,000 Units at an exercise price of $11 per Unit and 32,000 Class B Warrants at an exercise price of $6.1875 per Unit. These warrants are initially exercisable for a period of four years commencing on July 2, 1997. The underwriter's warrants contain anti-dilution provisions providing for adjustment of the number of warrants and exercise price under certain circumstances. The underwriter's warrants grant to the holders thereof certain rights of registration of the Units and Class B warrants which may be issued upon exercise of the underwriter's warrants. Dividend -------- On July 26, 1999, the Company returned an aggregate of $7,200,000, or $9 per share, to the owners of shares sold in the Offering. On November 3, 1999, with stockholder approval, the funds remaining in the escrow accounts were distributed to the Company to be used for general corporate purposes. Of the $7,200,000 returned to stockholders, $275,641 represents accumulated earnings and $6,924,359 represents additional paid-in capital. Elimination of Redemptive Common Stock Provision ------------------------------------------------ On October 22, 1999, a special meeting of the stockholders was held, and pursuant to a solicitation of proxies, the stockholders approved a change in the Certificate of Incorporation to eliminate the requirement that a Business Combination be approved by not less than two-thirds of the outstanding common stockholders and a proposal to terminate the escrow fund and distribute the amounts therein to the stockholders. The funds in the escrow account were distributed prior to December 31, 1999. The elimination of the requirement that a business combination be approved by not less than two-thirds of the outstanding common stockholders of the Company removed the event that would give rise to the possible redemption of the Company's common stock. As such, the Company eliminated the redemptive common stock provision for the number of potentially redemptive common shares at their initial per share price and reversed the related cumulative accretion of earnings on those potentially redemptive funds. F-15 NOTE 6 - INCOME TAXES The following table presents the current and deferred income tax provision for (benefit from) federal and state income taxes for the years ended December 31, 2000 and 1999: 2000 1999 ---------- --------- Current Federal $ (27,232) $ 37,749 State 800 36,554 ---------- --------- (26,432) 74,303 ---------- --------- Deferred Federal 4,568 - State (4,789) - ---------- --------- (221) - ---------- --------- Provision for income taxes $ (26,653) $ 74,303 ========== ========= The provision for (benefit from) income taxes differs from the amount that would result from applying the federal statutory rate for the years ended December 31, 2000 and 1999 as follows: 2000 1999 ----------- -------- Statutory regular federal income tax (benefit) rate (34.0)% 34.0% State taxes (6.0) 6.0 Other (2.5) 3.7 --------- ------- Total (42.5)% 43.7% ========== ======== The tax effects of temporary differences which give rise to the deferred tax provision (benefit) at December 31, 2000 consisted of the following: Deferred tax assets State operating loss carryforward $ 4,789 Other 272 --------- Total gross deferred tax assets 5,061 Less valuation allowance 1,628 --------- Net deferred tax assets $ 3,433 ========= F-16 NOTE 6 - INCOME TAXES (Continued) As of December 31, 2000, the Company had net operating loss carryforwards for state income tax purposes of approximately $54,000. The net operating loss carryforwards begin expiring in 2010. NOTE 7 - RELATED PARTY TRANSACTIONS Until April 30, 1999, the Company's general counsel was also the Company's secretary and a director. The Company utilized the general counsel's law firm for legal services in connection with Company activities. Fees paid by the Company for these services totaled approximately $0 and $7,000 for the years ended December 31, 2000 and 1999, respectively. The Company uses the services and some of the employees of an affiliated company and has its executive offices at the offices of the affiliate. The Company does not pay any amount to or for the employees of the affiliate or any rent for these offices. The Company reimburses the affiliate for documented out-of-pocket expenses incurred on its behalf. On May 5, 1999 and July 20, 1999, the affiliate lent an aggregate of $35,000 to the Company. This loan was represented by unsecured promissory notes, which were due on demand and non-interest-bearing. The proceeds of these loans were used for working capital. The principal on these loans was repaid on December 8, 1999. The Company's Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer are also principals and/or employees of the affiliate. F-17 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE (a) Previous independent accountants (i) On November 29, 2000, BDO Seidman LLP, the independent accountants of Orion resigned. (ii) The reports of BDO Seidman, LLP on the financial statements during the past two fiscal years contained no adverse opinion or disclaimer of opinion. (iii) Orion's board of directors participated in and approved the decision to change independent accountants on November 29, 2000. (iv) In connection with its audits for the two most recent fiscal years and review of unaudited financial statements through November 29, 2000, there have been no disagreements with BDO Seidman, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of BDO Seidman, LLP would have caused them to make reference thereto in their report on the financial statements. (v) During the two most recent fiscal years and through November 29, 2000, there have been no reportable events (as defined in Regulation S-K Item 304(a)(1)(v)). (vi) The Registrant requested that BDO Seidman, LLP furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements. A copy of such letter was filed as Exhibit 16.1 to Form 8-K/A on December 8, 2000. (b) New independent accountants Orion engaged Singer Lewak Greenbaum & Goldstein LLP as its new independent accountants as of November 29, 2000. During the two most recent fiscal years and through November 29, 2000, Orion did not consult with Singer Lewak Greenbaum & Goldstein LLP regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on Orion's consolidated financial statements, and no written report or oral advice was provided to Orion by concluding there was an important factor to be considered by Orion in reaching a decision as to an accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K. 10 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. The current directors and officers of Orion are as follows: Director Name Age Since Position - ---- --- -------- -------- Christopher A. Marlett 36 1999 Chairman of the Board, Chief Executive Officer and Director Anthony DiGiandomenico 34 1999 Chief Financial Officer and Director Dyana Williams Marlett 34 1999 Chief Operating Officer, Secretary, Treasurer and Director James D. Bowyer 62 1999 Director William C. Fioretti 49 1999 Director Christopher A. Marlett is a co-founder and member of MDB Capital Group LLC, an investment banking firm formed in December 1996. MDB is an NASD member broker-dealer which specializes in working with growth oriented companies. Prior to forming MDB, Mr. Marlett was employed as a Managing Director by Laidlaw Equities from May of 1995 to December of 1996 where he was in charge of Laidlaw's West Coast investment banking activities. From March of 1991 to May of 1995 Mr. Marlett was affiliated with Drake Capital Securities where he formed a division called Marlett/Mazzarella and directed all investment banking activities of the division. Mr. Marlett holds a degree in Business Administration from the University of Southern California. Mr. Marlett is the Chairman of Lipid Sciences Inc. a company engaged in medical research. Anthony DiGiandomenico is a co-founder and member of MDB, an investment banking firm formed in December 1996. Mr. DiGiandomenico served as President and CEO of the Digian Company from 1988 through 1996, a real estate development company and holds a Bachelors of Science Degree in Finance from the University of Colorado and a Masters in Business Administration from the Haas Business School at the University of California, Berkeley. Dyana Williams Marlett is a co-founder of MDB and acts as its Chief Operating Officer. From March of 1995 to December of 1996, Ms. Marlett was employed by Laidlaw Equities as a Vice President handling investment banking and syndicate activities for the West Coast. From October of 1990 through March of 1995, Ms. Marlett was employed at Drake Capital Securities where she acted as Syndicate Manager. Ms. Marlett holds several licenses with the National Association of Securities Dealers. Ms. Marlett is the wife of Mr. Christopher Marlett. James D. Bowyer is a co-founder and member of MDB, an investment banking firm formed in December 1996. Mr. Bowyer was employed at Laidlaw Equities from August of 1995 to December of 1996. Mr. Bowyer's career has spanned over thirty years in the securities industry focused on financing and 11 investing in growth companies. In 1976 Mr. Bowyer formed MacDonald, Krieger & Bowyer a full service broker-dealer based in Beverly Hills, California, which was subsequently sold in 1982. Mr. Bowyer then founded his own investment firm, J.D. Bowyer & Co. which he operated from 1983 to 1995. William C. Fioretti is the founder of Agritech Labs, and has served as its president and a director since 1992. Agritech Labs is a research and development company which concentrates on veterinary bio-pharmaceuticals. Mr. Fioretti also founded of Mannatech Incorporated (NASDAQ:MTEX) a publicly traded direct marketing company specializing in consumer health products. Mr. Fioretti served Mannatech as the Chief Executive Officer from 1993 through 1996, as Chief Scientific Officer from 1996 through 1997 and a director from inception until his retirement from Mannatech in November of 1997. Mr. Fioretti completed his undergraduate education at Appalachian State University from 1970-1974 receiving a Bachelor of Science Biology, completed his graduate training in biochemistry at the Medical University of South Carolina from 1974-1978 and did post graduate training at the University of Florida from 1978-1980. Members of the board of directors generally are elected annually by the stockholders and may be removed as provided in the General Corporation Law of the State of Delaware and the articles of incorporation and by-laws. Officers are appointed by the board of directors and serve at their pleasure. The board of directors does not have any committees at this time. Compliance with Section 16(a) of the Exchange Act Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the officers, directors and persons who beneficially own more than ten percent of a registered class of the equity securities of Orion ("ten percent stockholders") to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc. Officers, directors and ten percent stockholders are charged by SEC regulation to furnish Orion with copies of all Section 16(a) forms they file. Based solely upon its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, Orion believes that, during the fiscal year ended December 31, 2000, all filing requirements applicable to its executive officers, directors and ten percent stockholders were fulfilled. ITEM 10. EXECUTIVE COMPENSATION Executive Compensation - ---------------------- Orion does not currently compensate any of the officers or other employees. Orion does not intend to provide any remuneration to officers or employees until after a business combination, if any, of an operating business. Compensation of Directors - ------------------------- Directors of Orion receive no cash compensation for serving on the board of directors, but they receive reimbursement of reasonable expenses incurred in attending meetings. 12 ITEM 11. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information as of March 15, 2001 based on information obtained from the persons named below. It states the beneficial ownership of shares of the common stock by (i) each person known to be the owner of more than 5% of the outstanding shares of common stock, (ii) each director and (iii) all executive officers and directors as a group. Amount and Nature of Beneficial Percent Name of Beneficial Owner (1) Ownership of Class (2) Christopher A. Marlett 216,000 19.6% Anthony DiGiandomenico 81,025(3) 7.3% Dyana Williams Marlett 68,000(4) 6.1% James D. Bowyer 29,700(5) 2.4% William C. Fioretti 105,000 9.5% All directors and executive officers as a group 499,725(6) 45.3% (five persons) (1) The person's address is care of the Company at 401 Wilshire Boulevard - Suite 1020, Santa Monica, California 90401. (2) Percentage includes all outstanding shares of Common Stock plus any shares of common stock that the person has the right to acquire within 60 days pursuant to options, warrants, conversion privileges or other rights. (3) Includes 3,000 shares held in an individual retirement account. (4) Includes 3,000 shares held in custodian accounts. (5) Includes 3,000 shares of Common Stock issuable on exercise of Class A Warrants not yet exercisable. (6) See Notes 3, 4 and 5 above. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Orion uses the services and some of the employees of MDB Capital Group LLC and has its executive offices at the offices of MDB Capital Group LLC. Orion does not pay any amount to or for the employees of MDB Capital Group LLC or any rent for these offices. Orion reimburses MDB Capital Group LLC for documented out of pocket expenses incurred on its behalf. On May 5, 1999 and July 20, 1999, MDB Capital Group LLC lent to Orion an aggregate of $35,000. This loan was represented by unsecured promissory notes due on demand, bearing no interest. The proceeds of these loans were used for working capital. The principal on these loans was repaid on December 8, 1999. Each of Christopher A. Marlett, Anthony DiGiandomenico, James D. Bowyer and 13 Dyana Williams Marlett are officers and/or directors of the Company and principals and/or employees of MDB Capital Group LLC. ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Amended and Restated Certificate of Incorporation of the Registrant (Exhibit 3.1)(1) 3.2 Amendment dated October 22, 1999 to Amended and Restated Certificate of Incorporation (Exhibit 3.2)(2) 3.3 By-laws of the Registrant (Exhibit 3.2)(1) 4.1 Warrant Agency Agreement between American Stock Transfer & Company and the Registrant (Exhibit 4.2)(1) 4.2 Form of Representative's Warrant Agreement of Registrant (Exhibit 4.5)(1) 4.3 Form of Common Stock Certificate of Registrant (Exhibit 4.1)(1) 4.4 Form of Class B Unit Purchase Agreement of the Registrant (Exhibit 4.4)(1) 4.5 Form of Class A Common Stock Purchase Warrant Certificate of the Registrant (Exhibit 4.3)(1) 10.1 Underwriting Agreement (Exhibit 1.1)(1) 10.2 License Agreement, dated August 25,1995, between Bright Capital, Ltd. and the Company (Exhibit 10.3)(1) 10.3 Management Unit Purchase Option Plan (Exhibit 10.4)(1) 16.1 Letter from BDO Seidman, LLP dated December 7, 2000 (Exhibit 16.1) (3) - ------------------------------ (1) Incorporated by referenced from Registration Statement 33-03252 (2) Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1999 (3) Registrant's Report on Form 8-K/A filed on December 8, 2000 14 (b) Reports on Form 8-K (1) Registrant's Report on Form 8-K filed on December 4, 2000 Item 4. Changes in Registrant's Certifying Accountant Item 7. Financial Statement and Exhibits (2) Registrant's Report on Form 8-K/A filed on December 8, 2000 Item 4. Changes in Registrant's Certifying Accountant Item 7. Financial Statement and Exhibits 15 SIGNATURES Pursuant to the requirements of the Section 13 or 15 or 15(d) 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 on the 12th day of April, 2001. ORION ACQUISITION CORP. II /s/ Christopher A. Marlett ------------------------------ Christopher A. Marlett Chairman of the Board and Chief Executive Officer In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date /s/ Christopher A. Marlett Chairman of the Board April 12, 2001 - -------------------------- and Chief Executive Officer Christopher A. Marlett (Principal Executive Officer) /s/ Anthony DiGiandomenico Chief Financial Officer April 12, 2001 - -------------------------- and Director Anthony DiGiandomenico (Chief Accounting Officer and Principal Accounting Officer) /s/ Dyana Williams Marlett Chief Operating Officer, April 12, 2001 - -------------------------- Secretary, Treasurer and Dyana Williams Marlett Director /s/ James D. Bowyer Director April 12, 2001 - ------------------- James D. Bowyer /s/ William C. Fioretti Director April 12, 2001 - ----------------------- William C. Fioretti 16 -----END PRIVACY-ENHANCED MESSAGE-----