-----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, B44K5TbLuQkJlDrF2ItzwGZNpr/RIwM3I9Q3C5dZ7D6sjTcNMDKUM7a7munmZzGF JQ8svWWBuGdPTrj9xTx1mQ== 0001144204-04-004261.txt : 20040402 0001144204-04-004261.hdr.sgml : 20040402 20040402142849 ACCESSION NUMBER: 0001144204-04-004261 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040402 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: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-20837 FILM NUMBER: 04713143 BUSINESS ADDRESS: STREET 1: 401 WILSHIRE BOULEVARD STREET 2: SUITE 1020 CITY: SANTA MONICA STATE: CA ZIP: 90401 BUSINESS PHONE: 310-526-5000 MAIL ADDRESS: STREET 1: 401 WILSHIRE BOULEVARD STREET 2: SUITE 1020 CITY: SANTA MONICA STATE: CA ZIP: 90401 10KSB 1 v02450_10ksb.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB /X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended: December 31, 2003 / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________to ______________ 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 90401 SANTA MONICA, CA (zip code) (Address of principal executive offices) (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 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. |____| Issuer's revenues for the fiscal year ended December 31, 2003 were $-0-. As of March 15, 2004, the aggregate market value of the common stock held by non-affiliates of the Registrant was approximately $918,239. As of March 15, 2004, there were 1,030,907 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 ("the Company" or "Orion") was organized on October 19, 1995 to acquire an operating business by purchase, merger, combination or otherwise. 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, to structure, negotiate and consummate a business combination with a target business and to maintain its assets. 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; (ii) the amount of the equity interest it will be able to acquire in the business and opportunity to 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 1 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 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, unless it has in excess of $5,000,000 in assets. 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. CITADEL MEDIA, INC. Orion is evaluating the acquisition of a private company, Citadel Media, Inc., engaged in the business of operating a sports-oriented website and print media publishing network. The evaluation is dependant upon completion of due diligence, preparation of the target's financial statements to account for a number of recent acquisitions and conclusion of a satisfactory merger agreement. The acquisition will be on the basis of a common stock-for-equity security exchange, with Orion as the surviving corporation. In connection with the evaluation of Citadel and in anticipation of entering into negotiations for the merger of Citadel with Orion, on December 9, 2003 and on March 9, 2004, Orion entered into Promissory Notes and a Security Agreement with Citadel for loans to Citadel of $500,000 and $250,000, respectively, for an aggregate of $750,000, all due June 30, 2004. The loans are secured by substantially all the assets of Citadel and its subsidiaries, bear interest at 10% and are convertible in certain circumstances into preferred stock and warrants of Citadel. There is no assurance that Orion will be able to conclude a merger agreement with Citadel, and any merger will be subject to numerous conditions and other requirements, including approval by the Citadel stockholders of all classes and regulatory filings with the Securities and Exchange Commission. EMPLOYEES Orion does not have any employees other than its officers and directors. 2 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 Dyana Williams Marlett, 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 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. Orion 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. Because the exchange offer is pursuant to an agreement with the plaintiff, it is subject to modification with its consent. In connection with any transaction with a target, it is likely that Orion will seek or be required pursuant to the terms of any negotiations, to modify its terms. In such event, it is likely that the terms of the exchange and the right may be modified or even eliminated. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 3 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The common stock, and Class B Warrants are traded in the over-the- counter market and quoted on the OTC Bulletin Board under the symbols MTMR and MTMRZ. The Class B Warrants, by their terms, are exercisable for one year after consummation of a merger or acquisition with a target company, for one share of common stock upon payment of $0.12 per share. The following table sets forth the range of high and low closing bid prices for the common stock 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. Class B Common Stock Warrants ------------ -------- High Low High Low ---- --- ---- --- Year Ended December 31, 2003: First Quarter.......... $.75 $.45 $.51 $ -0- Second Quarter......... .85 .51 .66 .03 Third Quarter.......... .85 .81 .06 .06 Fourth Quarter......... 1.01 .81 1.02 .51 Year Ended December 31, 2002: First Quarter.......... 1.11 .55 .75 .35 Second Quarter......... 1.01 .68 .75 .30 Third Quarter.......... .70 .52 .55 .30 Fourth Quarter......... .75 .55 .75 .20 HOLDERS As of March 15, 2004, there were 30 holders of record of the common stock 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 Orion does not expect to pay any 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 4 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 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 years ended December 31, 2002 and 2003, 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.
2003 2002 ---- ---- STATEMENT OF OPERATIONS DATA: General and administrative expenses ......... $ (48,100) $ (135,877) Interest income ............................. 17,593 23,828 Provision for (benefit from) taxes .......... (30,897) -- Net Income (loss) ........................... 300 (112,049) Weighted average common shares outstanding .. 1,030,907 1,044,004 BALANCE SHEET DATA: Total Assets ................................ 2,024,839 2,032,931 Total liabilities ........................... 22,652 31,134 (Deficit) earnings accumulated during development stage ........................ (211,879) (212,209) Stockholders' equity ........................ 2,024,839 2,001,797
Orion is a development stage company, and to date its efforts have been limited to organizational activities, consummating an initial public offering, seeking a business combination and maintaining its assets. 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. 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 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, 2003, Orion had $1,492,921 in cash. Orion will invest its assets in U.S. Treasury bills and/or 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 operations 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. 5 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 unless it has in excess of $5,000,000 in assets. 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. 6 ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) CONTENTS DECEMBER 31, 2002 ================================================================================ Page INDEPENDENT AUDITOR'S REPORT F-2 FINANCIAL STATEMENTS Balance Sheet F-3 Statements of Operations F-4 Statements of Shareholders' Equity F-5 - F-6 Statements of Cash Flows F-7 - F-8 Notes to Financial Statements F-9 - F-18 F-1 INDEPENDENT AUDITOR'S REPORT BOARD OF DIRECTORS AND SHAREHOLDERS ORION ACQUISITION CORP. II We have audited the accompanying balance sheet of Orion Acquisition Corp. II (a development stage company) as of December 31, 2003, and the related statements of operations, shareholders' equity, and cash flows for each of the two years in the period ended December 31, 2003. 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, shareholders' equity, and cash flows for the periods from October 19, 1995 (inception) to December 31, 1999, which constituted retained earnings aggregating to $7,553. These periods have been audited by other auditors. We conducted our audit 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 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, 2003, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. SINGER LEWAK GREENBAUM & GOLDSTEIN LLP Los Angeles, California February 20, 2004, except for Note 9, as to which the date is March 9, 2004 The accompanying notes are an integral part of these financial statements. F-2 ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET DECEMBER 31, 2003 ================================================================================ ASSETS ASSETS Cash $ 1,492,921 Convertible note receivable 500,000 Other receivable 31,697 Deferred tax assets 221 ------------ TOTAL ASSETS $ 2,024,839 ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 22,652 ------------ Total current liabilities 22,652 ------------ CONTINGENCIES SHAREHOLDERS' 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 1,030,907 shares issued and outstanding 10,309 Additional paid-in capital 2,203,756 Deficit accumulated during the development stage (211,879) ------------ Total shareholders' equity 2,002,187 ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,024,839 ============ 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, 2003 AND 2002 AND FOR THE PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO DECEMBER 31, 2003 ================================================================================
For the Period from October 19, For the Year Ended 1995 December 31, (Inception) to ----------------------------- December 31, 2003 2002 2003 ------------ ------------ ------------ OPERATING EXPENSES General and administrative expenses $ 48,100 135,877 $ 1,145,455 Stock-based compensation expense -- -- 100,000 ------------ ------------ ------------ Total operating expenses 48,100 135,877 1,245,455 ------------ ------------ ------------ LOSS FROM OPERATIONS (48,100) (135,877) (1,245,455) ------------ ------------ ------------ OTHER INCOME (EXPENSE) Other income -- -- 2,183 Interest income 17,593 23,828 1,602,298 Interest expense -- -- (57,694) ------------ ------------ ------------ Total other income (expense) 17,593 23,828 1,546,787 ------------ ------------ ------------ INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES (30,507) (112,049) 301,332 PROVISION FOR (BENEFIT FROM) INCOME TAXES (30,897) -- 237,570 ------------ ------------ ------------ NET INCOME (LOSS) $ 390 $ (112,049) $ 63,762 ============ ============ ============ BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ 0.00 $ (0.11) ============ ============ WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 1,030,907 1,044,004 ============ ============
The accompanying notes are an integral part of these financial statements. F-4 ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO DECEMBER 31, 2003 ================================================================================
Deficit Common Stock Subject Accumulated Preferred Stock Common Stock to Possible Redemption Additional during the Treasury Stock --------------- -------------- ---------------------- Paid-in Development ------------------ Shares Amount Shares Amount Shares Amount Capital Stage Shares Amount ------ ------ ------ ------ -------- -------- -------- -------- -------- -------- Total - ----- BALANCE, OCTOBER 19, 1995 (INCEPTION) -- $ -- -- $ -- -- $ -- $ -- $ -- -- $ -- $ -- ISSUANCE OF FOUNDERS' SHARES 16,500 165 1,485 1,650 ------ ------ ------ ------ -------- -------- -------- -------- -------- -------- -------- BALANCE, DECEMBER 31, 1995 -- -- 16,500 165 -- -- 1,485 -- -- -- 1,650 ISSUANCE OF FOUNDERS' SHARES 58,500 585 5,265 5,850 SALE OF PRIVATE PLACEMENT SHARES 15,000 150 7,350 7,500 SALE OF CONVERTIBLE PREFERRED STOCK 110 1 10,999 11,000 SALE OF 800,000 SHARES, NET OF UNDERWRITING DISCOUNTS AND OFFERING COSTS 640,000 8,000 160,000 1,600,000 7,107,405 8,715,405 ACCRETION TO REDEMPTION VALUE OF STOCK -- 42,118 (42,118) - NET INCOME 42,651 42,651 ------ ------ ------ ------ -------- -------- -------- -------- -------- -------- -------- BALANCE, DECEMBER 31, 1996 110 1 730,000 8,900 160,000 1,642,118 7,132,504 533 -- -- 8,784,056 ISSUANCE OF OPTIONS 100,000 100,000 ACCRETION TO REDEMPTION VALUE OF COMMON STOCK -- 90,122 (90,122) -- NET INCOME 4,266 4,266 ------ ------ ------ ------ -------- -------- -------- -------- -------- -------- -------- BALANCE, DECEMBER 31, 1997 110 1 730,000 8,900 160,000 1,732,240 7,232,504 (85,323) -- -- 8,888,322 ACCRETION TO REDEMPTION VALUE OF COMMON STOCK 85,484 (85,484) -- NET INCOME 140,517 140,517 ------ ------ ------ ------ -------- -------- -------- -------- -------- -------- --------
The accompanying notes are an integral part of these financial statements. F-5 ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO DECEMBER 31, 2003 ================================================================================
Deficit Common Stock Subject Accumulated Preferred Stock Common Stock to Possible Redemption Additional during the Treasury Stock --------------- -------------- ---------------------- Paid-in Development ---------------- Shares Amount Shares Amount Shares Amount Capital Stage Shares Amount ------ ------ ------ ------ -------- -------- -------- -------- ------- ------- Total - ----- BALANCE, DECEMBER 31, 1998 110 $ 1 730,000 $ 8,900 160,000 $1,817,724 $7,232,504 $(30,290) $ -- $ -- $9,028,839 ELIMINATION OF REDEMPTIVE COMMON STOCK PROVISION 160,000 -- (160,000) (1,600,000) 1,600,000 -- REVERSAL OF ACCRETION TO REDEMPTIVE VALUE OF COMMON STOCK -- (217,724) 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 110 1 890,000 8,900 -- -- 1,908,145 7,553 -- -- 1,924,599 SALE OF PRIVATE PLACEMENT SHARES 212,157 2,122 294,898 297,020 NET LOSS (27,703) (27,703) ------ ------ ------ ------- -------- -------- -------- -------- ------- ------- ---------- BALANCE, DECEMBER 31, 2000 110 1 1,102,157 11,022 -- -- 2,203,043 (20,150) -- -- 2,193,916 NET LOSS (80,070) (80,070) ------ ------ ------ ------- -------- -------- -------- -------- ------- ------- ---------- BALANCE, DECEMBER 31, 2001 110 1 1,102,157 11,022 -- -- 2,203,043 (100,220) -- -- 2,113,846 ACQUISITION OF TREASURY STOCK IN CONJUNCTION WITH SETTLEMENT AGREEMENT 713 (71,250) (713) -- NET LOSS (112,049) (112,049) ------ ------ ------ ------- -------- -------- -------- -------- ------- ------- ---------- BALANCE, DECEMBER 31, 2002 110 1 1,102,157 11,022 -- -- 2,203,756 (212,269) (71,250) (713) 2,001,797 CANCELLATION OF TREASURY STOCK (71,250) (713) 71,250 713 -- NET INCOME 390 390 BALANCE, DECEMBER 31, 2003 110 $ 1 1,030,907 $10,309 -- $ -- $2,203,756 $(211,879) $ -- $ -- $2,002,187 ------ ------ ------ ------- -------- -------- -------- -------- ------- ------- ----------
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, 2003 AND 2002 AND FOR THE PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO DECEMBER 31, 2003 ================================================================================
For the Period from October 19, For the Year Ended 1995 December 31, (Inception) to ----------------------------- December 31, 2003 2002 2003 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 390 $ (112,049) $ 63,372 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 (31,697) 24,842 (33,549) Deferred tax assets -- -- (221) Prepaid assets -- 12,568 (3,212) Other assets -- 5,064 5,064 Increase (decrease) in Accounts payable and accrued expenses (8,482) (9,762) 22,652 ------------ ------------ ------------ Net cash provided by (used in) operating activities (39,789) (79,337) 191,996 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of United States Treasury bills -- -- (1,506,615) Funds issued for note receivable (500,000) -- (500,000) Sales or maturities of investments -- -- 1,506,615 ------------ ------------ ------------ Net cash provided by investing activities (500,000) -- (500,000) ------------ ------------ ------------ 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 private placement shares -- -- 304,520 Issuance of convertible preferred stock -- -- 11,000 ------------ ------------ ------------ New cash provided by financing activities -- -- 1,800,925 ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements. F-7 ORION ACQUISITION CORP. II (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 AND FOR THE PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO DECEMBER 31, 2003 ================================================================================
For the Period from October 19, For the Year Ended 1995 December 31, (Inception) to ----------------------------- December 31, 2003 2002 2003 ------------ ------------ ------------ Net increase (decrease) in cash $ (539,789) $ (79,337) $ 1,492,921 CASH, BEGINNING OF PERIOD 2,032,710 2,112,047 -- ------------ ------------ ------------ CASH, END OF PERIOD $ 1,492,921 $ 2,032,710 $ 1,492,921 ============ ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION INCOME TAXES PAID $ 800 $ -- $ 61,800 ============ ============ ============
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 Company's management has broad discretion with respect to the specified application of the assets of the Company, although substantially all of the assets are currently 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. Fair Value of Financial Instruments ----------------------------------- For certain of the Company's financial instruments, including cash, deferred tax assets, and accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities. 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. 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. The accompanying notes are an integral part of these financial statements. F-9 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 shareholders 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. The following potential common shares have been excluded from the computation of diluted net loss per share for the years ended December 31, 2003 and 2002 because they are not exercisable until after a Business Combination: 2003 2002 -------- -------- Class B Warrants 358,000 358,000 Series A convertible preferred stock 110,000 110,000 Stock option 10,000 10,000 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. The accompanying notes are an integral part of these financial statements. F-10 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recently Issued Accounting Pronouncements ----------------------------------------- In April 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies accounting and reporting for derivative instruments and hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for derivative instruments and hedging activities entered into or modified after September 30, 2003, except for certain forward purchase and sale securities. For these forward purchase and sale securities, SFAS No. 149 is effective for both new and existing securities after September 30, 2003. This statement is not applicable to the Company. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. In accordance with the standard, financial instruments that embody obligations for the issuer are required to be classified as liabilities. SFAS No. 150 will be effective for financial instruments entered into or modified after May 31, 2003 and otherwise will be effective at the beginning of the first interim period beginning after June 15, 2003. This statement is not applicable to the Company. NOTE 3 - CASH The Company maintains cash deposits at one financial institution. Deposits at the financial institution are insured by the Federal Deposit Insurance Corporation up to $100,000. As of December 31, 2003, the uninsured portions amounted to $103,313. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. The Company also maintains cash deposits at one investment brokerage. Deposits at the investment brokerage are insured by the Securities Investment Protection Corporation ("SIPC") up to $500,000 with an additional non-SIPC insurance coverage up to $900,000. As of December 31, 2003, the uninsured portions amounted to $684,668. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. The accompanying notes are an integral part of these financial statements. F-11 NOTE 4 - CONVERTIBLE NOTE RECEIVABLE On December 9, 2003, in conjunction with a non-binding letter of intent for a merger, the Company entered into a convertible promissory note for gross proceeds of $500,000. If the merger does not close, the note is convertible at the Company's option into 500,000 shares of the merger company's Series D preferred stock and a warrant. The note earns interest at 10% per annum, and the principal and any unpaid interest are due on June 30, 2004. The note is secured by substantially all the assets of the merger company. The warrant entitles the Company to purchase 500,000 shares of the merger company's common stock at an exercise price of $0.10 per share. The warrant expires in December 2006. NOTE 5 - 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. The exchange offer must be made after the Company completes its first Business Combination with a target company that results in the acquisition of one or more companies with operating businesses and results in the Company having assets in excess of $5,000,000. 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 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 made demand upon the Company for reimbursement of attorneys' fees incurred in defense of the suit prior to its voluntary dismissal. The former directors contended that they were entitled to reimbursement of attorneys' fees under a provision of Delaware corporate law. The Company considered the reimbursement request. An accrual was not made for any potential reimbursement in the accompanying financial statements. The accompanying notes are an integral part of these financial statements. F-12 NOTE 5 - CONTINGENCIES (CONTINUED) Litigation (Continued) ---------- 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. Messrs. 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 alleged 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. On May 15, 2002, a settlement agreement was signed between the Company and the Mentmore defendants, which was subject to execution and court approval. The settlement called for certain of the defendants to surrender 71,250 shares of the Company's common stock that were owned by those defendants, which the Company received and has canceled. In addition, certain of the defendants surrendered a warrant to purchase 100,000 shares of the Company's common stock, which the Company has canceled, and the former directors withdrew their claims for reimbursement by the Company of their defense costs. NOTE 6 - SHAREHOLDERS' 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 shareholders. 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. The accompanying notes are an integral part of these financial statements. F-13 NOTE 6 - SHAREHOLDERS' 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 of the issuance of the Class A Warrant, 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. The Class A Warrants expired on July 1, 2001. 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. The accompanying notes are an integral part of these financial statements. F-14 NOTE 6 - SHAREHOLDERS' EQUITY (CONTINUED) 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. The option was canceled as part of a settlement agreement dated May 15, 2002. 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 shareholder 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 shareholders, $275,641 represents accumulated earnings and $6,924,359 represents additional paid-in capital. The accompanying notes are an integral part of these financial statements. F-15 NOTE 6 - SHAREHOLDERS' EQUITY (CONTINUED) Elimination of Redemptive Common Stock Provision ------------------------------------------------ On October 22, 1999, a special meeting of the shareholders was held, and pursuant to a solicitation of proxies, the shareholders 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 shareholders and a proposal to terminate the escrow fund and distribute the amounts therein to the shareholders. 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 shareholders 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. NOTE 7 - INCOME TAXES The tax effects of temporary differences which give rise to the deferred tax provision at December 31, 2003 consisted of the following: Deferred tax assets Net operating loss carryforward $ 48,462 Less valuation allowance 48,241 ---------- NET DEFERRED TAX ASSETS $ 221 ========== 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, 2003 and 2002: 2003 2002 ---------- ---------- Current Federal $ (31,697) $ -- State 800 -- ---------- ---------- (30,897) -- ---------- ---------- Deferred Federal -- -- State -- -- ---------- ---------- TOTAL $ (30,897) $ -- ========== ========== The accompanying notes are an integral part of these financial statements. F-16 NOTE 7 - INCOME TAXES (CONTINUED) The provision for income taxes differs from the amount that would result from applying the federal statutory rate for the years ended December 31, 2003 and 2002 as follows: 2003 2002 -------- -------- Statutory regular federal income benefit rate (34.0)% (34.0)% State taxes (4.1) (4.3) Prior year adjustments -- (25.2) Change in valuation allowance 38.1 59.3 Other -- 4.2 -------- -------- TOTAL --% --% ======== ======== The valuation allowance decreased by $31,982 and increased by $54,223 during the years ended December 31, 2003 and 2002, respectively. The deferred income tax benefit of the loss carryforward is the only significant deferred income tax asset or liability of the Company and has been offset by a valuation allowance since management does not believe the recoverability of this deferred tax asset during the next fiscal year is more likely than not. Accordingly, a deferred income tax benefit for the year ended December 31, 2003 has not been recognized in these financial statements. As of December 31, 2003, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $114,000 and $265,000, respectively. The net operating loss carryforwards begin expiring in 2021 and 2011, respectively. NOTE 8 - 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. NOTE 9 - SUBSEQUENT EVENT On March 9, 2004, in conjunction with a non-binding letter of intent for a merger, the Company entered into a second convertible promissory note for gross proceeds of $250,000. If the merger does not close, the note is convertible at the Company's option into 250,000 shares of the merger Company's Series E preferred stock and a warrant. The note earns interest at 10% per annum, and the principal and any unpaid interest are due on June 30, 2004. The note is secured by substantially all the assets of the merger company. The warrant entitles the Company to purchase 250,000 shares of the merger company's common stock at an exercise price of $0.10 per share. The warrant expires in December 2006. The accompanying notes are an integral part of these financial statements. F-17 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 39 1999 Chairman of the Board, Chief Executive Officer, President and Director Anthony DiGiandomenico 37 1999 Chief Financial Officer and Director Dyana Williams Marlett 37 1999 Chief Operating Officer, Secretary, Treasurer and 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. 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. 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. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 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 6 believes that, during the fiscal year ended December 31, 2003, all filing requirements applicable to its executive officers, directors and ten percent stockholders were fulfilled. AUDIT COMMITTEE ISSUES Orion does not have a separate, standing audit committee. The board of directors handles these functions. Orion's directors are each involved actively in the financial services industry and are familiar with evaluating financial reports and the financial condition of public and private companies. Because of experience, education and current employment, Messrs. Marlett and DiGiandomenico and Ms. Marlett would be considered financial experts under Regulation S-B. Because of this expertise, the board determined it was not necessary to have an audit committee in connection with its operations at this time. None of the directors would be deemed "independent" under either SEC guidelines or the various exchange guidelines. CODE OF ETHICS The Company has not adopted a formal code of ethics statement. The board of directors evaluated the business of the company and the number of employees and determined that since the business is largely limited to maintaining its cash investments while its searches for a target company and consummates an acquisition and the only persons acting for Orion are the three directors who are also the officers, general rules of fiduciary duty and federal and state securities laws are adequate ethical guidelines. Moreover, each of the directors is a registered person with the NASD and subject to regulation and scrutiny of that entity. SHAREHOLDER-DIRECTOR COMMUNICATION Orion neither has a nominating committee for persons to be proposed as directors for election to the board of directors nor a formal method of communicating nominees from shareholders. Orion does not have any restrictions on shareholder nominations under its certificate of incorporation or by-laws. The only restrictions are those applicable generally under Delaware Corporate Law and the federal proxy rules. Currently the entire board of directors decides on nominees, on the recommendation of one or more members of the board. None of the members of the board of directors are "independent." The board of directors will consider suggestions from individual shareholders, subject to evaluation of the person's merits. Stockholders may communicate nominee suggestions directly to any of the board members, accompanied by biographical details and a statement of support for the nominees. The suggested nominee must also provide a statement of consent to being considered for nomination. Although there are no formal criteria for nominees, the board of directors believes that persons should be actively engaged in business endeavors, have a financial background, and be familiar with acquisition strategies and money management. Because the management and directors of Orion are the same persons, the board of directors has determined not to adopt a formal methodology for communications from shareholders on the belief that any communication would be brought to the boards' attention by virtue of the co-extensive employment. The board of directors does not have a formal policy of attendance of directors at the annual meeting. It does encourage such attendance. Orion did not have an annual meeting in 2003. 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. 7 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. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information as of March 15, 2004 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 Ownership of Class(2) - ------------------------ --------- ----------- Christopher A. Marlett(1) 256,000 23.8% Anthony DiGiandomenico(1) 81,025(3) 7.6% Dyana Williams Marlett(1) 38,000(4) 3.7% Topix, Inc.(6) 70,000 6.8% All directors and executive officers as a group (five persons) 375,025(5) 36.4% _____________________ (1) Each person's address is care of the Company at 401 Wilshire Boulevard, 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) See Notes 3 and 4 above. (6) The address of Topix, Inc. is 401 Wilshire Boulevard, Santa Monica, California 90401. Excludes 57,500 shares of common stock that may be acquired by Topix under 57,000 Class B Warrants which are not currently exercisable. Orion does not have any equity compensation plans that have or required shareholder approval. Orion will consider adopting an equity compensation plan and other equity based compensation for executives on an individual basis in the future in connection with an acquisition. At such time, Orion will obtain the required approvals. 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. Each of Christopher A. Marlett, Anthony 8 DiGiandomenico and Dyana Williams Marlett are officers and/or directors of the Company and principals 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 Common Stock Certificate of Registrant (Exhibit 4.1)(1) 4.3 Form of Class B Unit Purchase Agreement of the Registrant (Exhibit 4.4)(1) 4.4 Form of Class A Common Stock Purchase Warrant Certificate of the Registrant (Exhibit 4.3)(1) 10.1 License Agreement, dated August 25,1995, between Bright Capital, Ltd. and the Company (Exhibit 10.3)(1) 10.2 Management Unit Purchase Option Plan (Exhibit 10.4)(1) 10.3 Secured Promissory Note of Citadel Inc.(4) 10.4 Security Agreement between Registrant and Citadel Media Inc.(4) 16.1 Letter from BDO Seidman, LLP dated December 7, 2000 (Exhibit 16.1) (3) 31.1 Form of Certification Pursuant to Rule 13a-14 and 15d-14 under the Securities and Exchange Act of 1934, as Amended. (Filed herewith) 32.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith) ________________________ (1) Incorporated by referenced from Registration Statement 33-03252 (2) Incorporated by reference from Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1999 (3) Incorporated by reference from Registrant's Report on Form 8-K/A filed on December 8, 2000 (4) Incorporated by reference from Registrant's Report on Form 8-K filed December 9, 2003. 9 (b) Reports on Form 8-K The Company filed a Report on Form 8-K on December 9, 2003 under Item 5, a loan of $500,000 to Citadel Media, Inc., on a secured basis. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. AUDIT FEES In each of fiscal years 2002 and 2003, for the aggregate professional services rendered by the principal accounting firm for the audit of its annual financial statements and review of financial statements and other statutory and regulatory filings, Orion paid the sum of $27,863.16 and $24,856.77, respectively. AUDIT RELATED FEES In each of the fiscal years 2002 and 2003, Orion paid no amounts in respect of audit related fees. TAX FEES In each of the fiscal years 2002 and 2003, Orion paid $4,785.35 and $3,514.37, respectively, for tax compliance, tax advice and related professional services rendered by Orion's principal accounting firm. ALL OTHER FEES Orion did not pay any amounts in respect of other audit services in fiscal years 2002 and 2003. BOARD APPROVAL The services rendered by Orion's principal accounting firm were approved by the board of directors because it does not have an audit committee. Approval was based on an evaluation of past services and the need for these services in the current period, comparative analysis of rates and availability of service staff and management's recommendation. Each service was specifically evaluated before an engagement was undertaken. 10 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 31st day of March 2004. ORION ACQUISITION CORP. II By: /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, President and Chief March 31, 2004 - ------------------------------ Executive Officer (Principal Executive Officer) Christopher A. Marlett /s/ Anthony DiGiandomenico Chief Financial Officer and Director (Chief March 31, 2004 - ------------------------------ Accounting Officer and Principal Account Officer) Anthony DiGiandomenico /s/ Dyana Williams Marlett Chief Operating Officer, Secretary, Treasurer March 31, 2004 - ------------------------------ and Director Dyana Williams Marlett
EX-31.1 3 v02450_ex31-1.txt EXHIBIT 31.1 FORM OF CERTIFICATION PURSUANT TO RULE 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED CERTIFICATIONS I, Christopher A. Marlett, certify that: 1. I have reviewed this annual report on Form 10-KSB of Orion Acquisition Corp II; 2. Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: March 31, 2004 /s/ Christopher A. Marlett -------------------------- Name: Christopher A. Marlett Title: President and Chief Executive Officer EX-31.2 4 v02450_ex32-1.txt EXHIBIT 32.1 FORM OF CERTIFICATION PURSUANT TO RULE 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED CERTIFICATIONS I, Anthony DiGiandomenico, certify that: 1. I have reviewed this annual report on Form 10-KSB of Orion Acquisition Corp II; 2. Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: March 31, 2004 /s/ Anthony DiGiandomenico -------------------------- Name: Anthony DiGiandomenco Title: Chief Financial Officer EX-32.1 5 v02450_ex33-1.txt EXHIBIT 33.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Orion Acquisition Corp. II (the "Company") on Form 10-KSB for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. March 31, 2004 By: /s/ Christopher A. Marlett -------------------------- Christopher A. Marlett President and Chief Executive Officer EXHIBIT 33.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Orion Acquisition Corp. II (the "Company") on Form 10-KSB for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. March 31, 2004 By: /s/ Anthony DiGiandomenico -------------------------- Anthony DiGiandomenico Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----