10QSB 1 orion_10qsb-93001.txt 10QSB FOR 9/30/01 QUARTER END UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended: September 30, 2001 _ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 000-20837 Orion Acquisition Corp. II (Exact name of registrant as specified in its charter) Delaware 13-3863260 (State of Incorporation) (IRS Employer Identification No.) 401 Wilshire Blvd., Suite 1020 Los Angeles, California 90401 (Address of principal executive office) (Zip code) Registrant's telephone number, including area code: (310) 526-5000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ As of September 30, 2001, 1,102,157 shares of Common Stock were issued and outstanding.
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET September 30, 2001 (unaudited) -------------------------------------------------------------------------------- ASSETS Assets Cash $ 455,858 Investments - held to maturity 1,643,052 Income taxes receivable 27,232 Deferred income taxes 221 Other assets 29,628 ---------------- Total assets $ 2,155,991 ================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 23,932 ---------------- Total current liabilities 23,932 ---------------- 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 (82,007) ---------------- Total stockholders' equity 2,132,059 ---------------- Total liabilities and stockholders' equity $ 2,155,991 ==================
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 2001 and 2000 (unaudited) and for the Period from October 19, 1995 (Inception) to September 30, 2001 (unaudited) ------------------------------------------------------------------------------------------------------------------ For the Period from For the For the October 19, Three Months Ended Nine Months Ended 1995 September 30, September 30, (Inception) to --------------------------------- -------------------------------- September 30, 2001 2000 2001 2000 2001 --------------- --------------- ---------------- --------------- ---------------- (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Operating expenses General and administrative expenses $ 50,546 $ 47,246 $ 128,180 $ 112,791 $ 931,546 Stock-based compensation expense - - - - 100,000 --------------- --------------- ---------------- --------------- ---------------- Total operating expenses 50,546 47,246 128,180 112,791 1,031,546 --------------- --------------- ---------------- --------------- ---------------- Loss from operations (50,546) (47,246) (128,180) (112,791) (1,031,546) --------------- --------------- ---------------- --------------- ---------------- Other income (expense) Interest income 16,010 23,980 66,323 64,124 1,550,002 Interest expense - - - - (57,694) --------------- --------------- ---------------- --------------- ---------------- Total other income (expense) 16,010 23,980 66,323 64,124 1,492,308 --------------- --------------- ---------------- --------------- ---------------- Income (loss) before provision for income taxes (34,536) (23,266) (61,857) (48,667) 460,762 Provision for income taxes - - - - 267,129 --------------- --------------- ---------------- --------------- ---------------- Net income (loss) $ (34,536) $ (23,266) $ (61,857) $ (48,667) $ 193,633 ================ ================ ================ ================ ================
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 2001 and 2000 (unaudited) and for the Period from October 19, 1995 (Inception) to September 30, 2001 (unaudited) ------------------------------------------------------------------------------------------------------------------ For the Period from For the For the October 19, Three Months Ended Nine Months Ended 1995 September 30, September 30, (Inception) to --------------------------------- -------------------------------- September 30, 2001 2000 2001 2000 2001 --------------- --------------- ---------------- --------------- ---------------- (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Basic and diluted Loss per common share $ (0.03) $ (0.02) $ (0.06) $ (0.40) =============== =============== ================ ============== Weighted-average common shares outstanding 1,102,157 1,102,157 1,102,157 1,102,157 ================ =============== =============== ===============
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 2001 and 2000 (unaudited) and for the Period from October 19, 1995 (Inception) to September 30, 2001 (unaudited) ------------------------------------------------------------------------------------------------------------------ For the Period from October 19, For the 1995 Nine Months Ended (Inception) to September 30, September 30, --------------------------------- 2001 2000 2001 ---------------- --------------- ---------------- (unaudited) (unaudited) (unaudited) Cash flows from operating activities Net income (loss) $ (61,857) $ (48,667) $ 193,633 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) decrease in Income taxes receivable - - (27,232) Deferred income taxes - - (221) Other assets - (12,568) (29,628) Increase (decrease) in Accounts payable and accrued expenses (16,916) (84,531) 23,933 ---------------- --------------- ---------------- Net cash provided by (used in) operating activities (78,773) (145,766) 297,985 ---------------- --------------- ---------------- Cash flows from investing activities Purchase of United States Treasury bills - (57,577) (1,506,615) Sales or maturities of investments (50,849) - (136,437) ---------------- --------------- ---------------- Net cash used in investing activities (50,849) (57,577) (1,643,052) ---------------- --------------- ---------------- Cash flows from financing activities Dividend - - (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 Repayment of related party note - - (35,000) Issuance of founders' shares - - 7,500 Issuance of common stock - 297,020 304,520 Issuance of convertible preferred stock - - 11,000 ---------------- --------------- ---------------- Net cash provided by financing activities - 297,020 1,800,925 ---------------- -------------- ----------------
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 2001 and 2000 (unaudited) and for the Period from October 19, 1995 (Inception) to September 30, 2001 (unaudited) ------------------------------------------------------------------------------------------------------------------ For the Period from October 19, For the 1995 Nine Months Ended (Inception) to September 30, September 30, --------------------------------- 2001 2000 2001 ---------------- --------------- ---------------- (unaudited) (unaudited) (unaudited) Net increase (decrease) in cash $ (129,622) $ 93,677 $ 455,858 Cash, beginning of period 585,480 522,187 - ---------------- --------------- ---------------- Cash, end of period $ 455,858 $ 615,864 $ 455,858 ================ =============== ================ Supplemental disclosures of cash flow information Income taxes paid $ - $ - $ 121,000 ================ ============== ===============
ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS September 30, 2001 (unaudited) ------------------------------------------------------------------------------- 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. Subsequently, in 1999 the Company pad a dividend of $7,200,000. 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 Basis of Presentation The accompanying financial statements have been prepared in conformity with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal, recurring adjustments considered necessary for a fair presentation have been included. The financial statements should be read in conjunction with the audited financial statements included in the Company's annual report on Form 10-KSB for the year ended December 31, 2000. The results of operations for the nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. 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 evoting 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. ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS September 30, 2001 (unaudited) ------------------------------------------------------------------------------- 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 loss per share for all periods presented because they are not exercisable until after a Business Combination: For the Nine Months Ended September 30, ------------------------------ 2001 2000 ------------ ---------- (unaudited) (unaudited) Class A Warrants - 880,000 Class B Warrants 358,100 390,100 Series A Convertible Preferred Stock 110,000 110,000 Stock option 10,000 10,000 Option to purchase Common Stock 100,000 100,000 Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 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. The United States treasury bills have matured and have been invested in money market funds held at Wells Fargo Investments as of September 30, 2001. ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS September 30, 2001 (unaudited) ------------------------------------------------------------------------------- NOTE 4 - 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. The former directors of the Company who were named as defendants in the suit have made demand upon the Company for reimbursement of 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 and 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. ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS September 30, 2001 (unaudited) ------------------------------------------------------------------------------- NOTE 5 - RELATED PARTY TRANSACTIONS 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. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Results for the nine-month period ending September 30, 2001, consisted of investment income earned from money market accounts less expenses associated with general and administrative overheads and litigation expenses. The Company continues to search for a suitable company to complete a business combination or merger. There remains adequate cash on hand to bear the costs of due diligence or legal fees necessary to locate and evaluate potential candidates for a business combination. If a candidate is found the Company may need to raise additional funds to complete the acquisition. PART II. OTHER INFORMATION ITEM 1: Legal Proceedings On July 1, 1999, a Class B Warrantholder 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 peiod 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. Frankel, J. Thomas Chase, and Michael D. Schenker. Messrs. Karmer, 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 will be entering the discovery phase. ITEM 2: Changes in Securities None. ITEM 3: Defaults Upon Senior Securities None ITEM 4: Submission of Matters to a Vote of Security Holders None ITEM 5: Other Information None ITEM 6: Exhibits and Reports on Form 8-K (a) Exhibits: None (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ORION ACQUISITION CORP. II Dated: November 5, 2001 /s/ Anthony Digiandomenico ------------------------------- Anthony Digiandomenico Chief Financial Officer