The following revised submission is in response to staff comments
in correspondence dated May 3, 1999
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street N.W., Washington, D.C. 20549
FORM 10 - SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER -0-300181-14825
MERIDIAN HOLDINGS, INC.
(Exact Name Of Registrant As Specified In Its Charter)
COLORADO 52-2133742
- - ----------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
900 Wilshire Boulevard , Suite 500
Los Angeles, California 90017
(213) 627-8878 Fax: (213) 627-9183
Attention: Anthony C. Dike
- - ------------------------------------------------
(Address, Including Zip Code, And Telephone Number, Including Area
Code, Of Registrant's Principal Executive Offices)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which each
to be so registered class is sought to be registered
- - ------------------------ -----------------------------------
Common Stock OTC Electronic Bulletin Board
Securities Registered Pursuant to Section 12(b) of the Act:
Common Shares $.001 par value
- - ------------------------------------------
Title of each class to be so registered
Total Number of Pages: 27
Index to Exhibits Appears on Page: 24
(Filing stipulated in United States Dollars Unless Otherwise Stated)
INFORMATION REQUIRED IN REGISTRATION STATEMENT
TABLE OF CONTENTS
PAGE
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 3. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . .13
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . .13
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL. . .13
ITEM 6. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . .14
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . .14
ITEM 8. DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . .14
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS . . . . . . .15
ITEM 2. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . .15
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING. . . . . . .16
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . .16
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . .16
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ITEM 1 INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . .17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .17
PART F/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..17
Exhibit A Articles of Incorporation (filed in paper)
Exhibit B Bylaws of Meridian Holdings, Inc. (filed in paper)
Exhibit C Letter of Intent to Acquire Assets.(included with filing)
i
PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. THE COMPANY
History and Organization
Meridian Holdings, Inc. (the "Company") is a Colorado corporation
organized on October 13th, 1998. Since incorporation, the Company's
activities have been limited to capital formation. The Company intends
to become an Internet retailer of computer software and hardware products.
The Company currently maintains offices at 900 Wilshire Blvd,
Suite 500, Los Angeles, California 90017 and its telephone number is
(213) 627-8878.
B. THE INDUSTRY
BUSINESS
There are over 50,000 computer software programs and related
Hardwares on the market in the United States currently. From this wide
selection, the Company has selected approximately 40,000 software programs
and hardware which it proposes to place into an Electronic Catalogue and
thereafter market through a Web-site on the Internet. In the future,
additional software programs and hardware may be added to the catalogue.
When operational, an on-line customer would be able to browse through the
Company's catalogue and select one or more software programs to purchase.
When a program is identified, the customer may then fill-out an order entry
form on-line.
1.
The information required to complete the order form will include details of
the software program and the credit card information for the sale. From
the completed order form, the credit card information may be verified
electronically. Upon verification, the funds will be automatically
deposited into a trust account and the customer will be assigned an
electronic identification number, software to be downloaded onto the
customers hard-drive. For hardware products, the company has established
a relationship with one of the major distributors of computer hardware
and software products, to help fulfill all on-line orders placed through its'
web-site.
The sales transaction described above for software sales, differs
fundamentally from the traditional software sales mechanism. Typically,
when a software program is sold, whether by direct mail or through an
outlet, the buyer receives a physical copy of the software for install.
However, when the Company's distribution channel is used, the program
acquired is downloaded directly, in real time, to the purchaser's
hard-drive from a copy of the software program stored in the Company's
Web-server.
The ability of the Company to introduce the marketing channel as described
above, is predicated on the willingness of the manufacturers of software
programs to enter into distribution/vendor agreements with the Company.
Currently, the Company is not in discussions with nor has it contracted
with any software manufacturers. However, Management reasonably believes
that it will be able to secure and enter into such contracts. Meridian
Holdings, Inc., was founded to capitalize on the opportunity for on-line
retailing. Management believes that software distribution,
1.
utilizing the model set forth herein, is particularly suited to on-line
retailing for several reasons. First, an on-line retailer can offer
virtually unlimited on-line shelf space. Secondly, it can offer its
customers a wide range of products which, hitherto, would have required a
large amount of operational space. Thirdly, serving a global market,
on-line retailer realize substantial economies relative to the traditional
software retailer.
And, finally, the software purchaser has the convenience of immediate use
of the software purchased.
FUTURE PRODUCT LINE ADDITIONS
Products will be added based primarily on what is being sought by the
Company's website users. This will be determined through information
gathered through on-line questionnaires.
RISK FACTORS
IN ANALYZING THIS COMPANY, PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK FACTORS:
a. DEVELOPMENT STAGE ENTERPRISE-- Meridian Holdings, Inc. was recently
incorporated. It has no operational history and has yet to engage in
business of any type. Its operations will, therefore, be subject to
the risks inherent in the establishment of a new business. While management
believes that the Company will be successful in implementing its business
plan as set forth herein, there can be no assurance that the Company will be
able to achieve its goals or to be successful.
b. ADDITIONAL FINANCING REQUIRED-- As of the date hereof, the Company
possesses working capital of only $6,176. Such an amount will be
insufficient to conduct more than tertiary operations. Accordingly,
the Company will require a significant amount of additional capital, no
assurance can be given that such endeavors will be successful. Even if
financing were to become available, it is likely that the cost of such funds
will be high and possibly prohibitive due to the fact that the Company is a
start-up company without a record of success. Other obstacles to obtaining
additional financing may arise in the future. Without significant additional
capital, the Company is unlikely to be able to conduct any business.
(See "BUSINESS".)
c. IMPACT OF CHANGES IN TECHNOLOGY-- The Company's operations will
utilize a new and rapidly evolving technology - on line commerce. By
the nature of this business, the Company must continually develop and
upgrade its technology and transaction-processing systems and improve
its Web site. There can be no assurance that the Company will be successful
in addressing these issues and, the failure to do so could have a material
adverse effect on the Company's business. (See "BUSINESS".)
d. COMPETITION-- The Company is new and unseasoned and, therefore, it
will face the inherent difficulties of entering an established field.
Numerous companies with assets and resources significantly greater than
those of the Company will compete with the Company in the marketplace.
Further, there is no assurance that additional, better financed, and more
experienced companies, will not enter the marketplace to compete with the
Company. (See "BUSINESS".)
2.
e. CONTROL BY MANAGEMENT-- Mr. Okehie serves as the sole officer and
director of the Company. Serving in multiple capacities, Mr. Okehie
exercises an unusually large amount of control and discretion over the
Company's activities. In addition, Mr. Okehie controls 85% of the Company's
stock. He can, pursuant to Colorado law, elect all of the Company's
directors, appoint its officers and control the Company's affairs and
operations.
The Company's Articles of Incorporation do not provide for cumulative
voting. (See "PRINCIPAL STOCKHOLDERS" and "MANAGEMENT".)
f. LACK OF MARKET RESEARCH-- The Company has neither conducted nor
have others made available to it the results of any market research
pertaining to the proposed activities of the Company. Therefore, management
has no assurances that a market exists for its proposed business activity.
(See "BUSINESS".)
g. DEPENDENCE ON MANAGEMENT-- The Company's sole officer and director,
Mr. Okehie, has no experience in the business activities in which the
Company intends to engage. Accordingly, potential investors of the
Securities offered herein should critically evaluate the information
concerning the Company's management. (See "MANAGEMENT".).
Additionally, the management of the Company will be largely dependent on
the active participation of Mr. Okehie. In the event that the services
of Mr. Okehie were not available to the Company, the Company's ability to
achieve its goals as set forth herein is likely to be severely and
adversely affected. The Company does not maintain key-man insurance nor
is there any plan to purchase any such insurance in the foreseeable future.
f. POTENTIAL CONFLICT OF INTEREST-- No Full-time Employees - Limited
Staff for Operations. Mr. Okehie maintains full-time employment in other
activities. Hence, the time he can devote to the affairs of the Company is
necessarily limited.
The amount of time Mr. Okehie will devote to the business of the Company is
unlikely to exceed 45 hours per month. Thus, there exists conflicts of
interest including, among other things, time and effort.
(See "MANAGEMENT".)
g. DIVIDENDS-- No dividend has been paid on the Common Stock since
inception and none is contemplated at any time in the foreseeable future.
(See "DIVIDENDS".)
h. PREFERRED STOCK-- The Company is authorized to issue 10,000,000 shares
of Preferred Stock, $.00l par value. The Preferred Stock may be issued in
series from time to time with such designation, rights, preferences and
limitations as the Board of Directors of the Company may determine by
resolution. The potential exists, therefore, that Preferred Stock may be
issued which would grant dividend preferences and liquidation preferences
to preferred stockholders over common stockholders. As of the date of
this writing none has been issued. Unless the nature of a particular
transaction and applicable statutes require such approval, the Board of
Directors has the authority to issue these shares without stockholder
approval. The issuance of Preferred Stock may have the affect of
delaying or preventing a change in control of the Company without any
further action by stockholders. There are no present plans to issue any
such shares of stock.
3.
i. PUBLIC MARKET-There is not now, and there may never be, a public
market of any kind for the securities issued by the Company, including
the Shares. There is no assurance that the price of the Shares in any
market which may develop will be greater than the offering price. As a
result of these factors, holders of the Company's Common Stock may not
be able to liquidate their investment.
j. PENNY STOCK-The Company's securities may be deemed "penny stock" as
defined in Rule 3a51-1 of the Securities and Exchange Act of 1934, as
amended. Such a designation could have a material adverse effect on the
development of the public market for shares of the Company's common
stock or, if such a market develops, its continuation, since
broker-dealers are required to personally determine whether an
investment in such securities is suitable for customers prior to any
solicitation of any offer to purchase these securities. Compliance with
procedures relating to sale by broker-dealers of "penny stock" may make
it more difficult for purchasers of the Company's common stock to
resell their shares to third parties or to otherwise dispose of such
shares.
k. INTERLLECTUAL PROPERTY-The Company does not have any patents for its
technology and there can be no assurance that the Company will be able
to protect its proprietary rights from use by its competitors. The
commercial success of Company may also depend upon its products and
services not infringing any intellectual property rights of others and
upon no such claims of infringement being made.
l. PERMITS AND LICENSES-The operations of the Company may require
licenses and permits from various governmental authorities. There can
be no assurance that the Company will be able to obtain all necessary
licenses and permits that may be required to carry out its plan.
m. CURRENCY FLUCTUATION-The Company's potential operation make it
subject to foreign currency fluctuation and such fluctuation may
adversely affect the Company's financial position and results.
Management will undertake to hedge currency risks by negotiating its
joint venture agreements cash receipts in U.S. dollars. There can be no
assurance that steps taken by management to address foreign currency
fluctuations will eliminate all adverse effects and accordingly, the
Company may suffer losses due to adverse foreign currency fluctuation.
Such fluctuation may also influence future contribution margins.
n. CURRENT TECHNOLOGY-The technology necessary to create a service such
as the one the Company will be offering exists today and is readily
accessible, therefore, there would be ease of entry and exit for
would-be competitors.
o. INTERNET-Use of the internet by consumers is at a very early stage
of development, and market acceptance of the Internet as a medium is
subject to high level of uncertainty. The Company expects to experience
significant fluctuations in operating results in future periods due to
a variety of factors, including, but not limited to, (i) market
acceptance of the Internet as a medium for consumers, (ii) the
Company's ability to create and deliver internet content in order to
4.
attract users to its websites to purchase its products and/or services,
and to attract advertisers to its websites, (iii) there can be no
assurance that the Company's content will be attractive to a sufficient
number of users to generate significant revenues, (iv) intense
competition from other providers of related content over the Internet,
(v) delays or errors in the Company's ability to effect electronic
commerce transactions, (vi)the Company's ability to upgrade and
develop its systems and infrastructure in a timely and effective manner
(vii) technical difficulties, system downtime or Internet brownouts,
(viii) the Company's ability to attract customers at a steady rate and
maintain customer satisfaction, (ix) seasonality of the industry,
(x) seasonality of advertising sales, (xi) Company promotions and sales
programs, (xii) the amount and timing of operating costs and capital
expenditures relating to the expansion of the Company's business,
operations and infrastructure and the implementation of marketing programs,
key agreements and strategic alliances, (xiii) the level of returns
experienced by the Company; and (xiv) general economic conditions and
economic conditions specific to Internet, on-line commerce industry.
p. RISK ASSOCIATED WITH THE YEAR 2000-The year 2000 issue is the result
of Computer programs written using two digits rather than four to
define the applicable year. As a result, date-sensitive software may
recognize a date using "00" as Year 1900 rather than the Year 2000.
This could result in system failures or miscalculations causing
disruptions of operations, including, among others, a temporary
inability to process transactions, send invoices or engage in similar
normal business activities. Management believes that the Company does
not have a material exposure to Year 2000 issue with respect to its own
information systems since its existing systems correctly define the
Year 2000. The Company intends to conduct an analysis throughout its
development stage to determine the extent to which its major suppliers'
systems (insofar as they relate to the Company's business) are subject
to the Year 2000 issue. The Company is currently unable to predict the
extent to which it would be vulnerable to its suppliers' failure to
remediate any Year 2000 issues on a timely basis. In particular, most
of the purchase from the Company's Internet website will be made with
credit cards and the Company's operations may be materially adversely
affected to the extent its customers are unable to use their credit
cards due to Year 2000 issues that are not rectified by their credit
card providers.
q. TELECOMMUNICATIONS-The Company's services are dependent on the use
of the Internet and telephone connections. Any interruptions, delays or
capacity problems experienced on the Internet or with the telephone
connection could adversely affect the ability of the Company to provide
its services. The telecommunications industry is subject to regulatory
control. Any amendments to current regulations could have a material
adverse effect on the Company's business, results of operations and
prospects. The Company's business is highly dependent on its computers
and telecommunications systems for the operation and quality of its
services. The temporary or permanent loss of all or portion of either
system, or significant replacement delays, for whatever reason, could
have a materially adverse effect on the Company's business, financial
condition and results of operations.
5.
Note; In addition to the above risks, businesses are often subject to
risks not foreseen or fully appreciated by management. In reviewing
this filing, potential investors should keep in mind other possible
risks that could be important.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE INTERNET
The Internet is the world's largest telecommunications network in
existence today and has brought low cost global computer telecommunications
within the reach of all businesses and many consumers in almost all
developed and third-world growth economies.
The Internet and Internet technology has been growing and evolving since its
inception over 30 years ago. From its inceptions, the Internet was intended
as more than just a computer network, but as a means of facilitating
collaboration and development at great speed among groups like academics,
industry researchers and business entrepreneurs.
Originally created as a means of information exchange for the U.S.
Department Of Defense, it quickly became adopted by others who developed
the network to support open global academic and research activities.
People would be able to send messages, research material and various
other types of communications electronically. Data would be converted
and sent over telephone lines through a vast computer network.
Transmission time was much faster than mail or fax with the added
advantage of being low cost: no long-distance charges were incurred
since messages were relayed to a local computer network.
Innumerable individuals, companies, researchers etc. now use the Internet
and its technologies to significantly enhance their specific activity or
pursuit.
The worldwide network of hosts (sites) has grown from 2000 to 1 million
in the past eight years and is likely to exceed 100 million hosts over the
next five years.
The Internet Business Center made the following data available collected
from the 10th Annual software Publishing Association Conference:
- - - - It is estimated that 60% of U.S. households will have PC's by
the end of 1998
- - - - 12% of households with PC's have modems
- - - - 6% of households with PC's subscribe to on-line Internet services
- - - - The Internet is growing between 6% and 12% per month
- - - - There are Internet sites in 137 countries
- - - - The cost of subscribing to an Internet service is declining
- - - - Many major businesses (226 of the 490 largest companies) already
have a presence on the Internet
- - - - 39% of all communications companies have a presence on the Internet
- - - - 24% of information technology firms have a presence on the Internet
6.
Reasons why people use the internet according to Georgia Tech Research
Corporation's ("GTRC") 1998 survey (Of the users surveyed, over one
third said that they were willing to pay fees for information services,
providing quality was ensured):
- - - - 86.03% Searching
- - - - 63.01% Browsing
- - - - 54.05% Work
- - - - 51.21% Education
- - - - 47.02% Communication
- - - - 45.48% Entertainment
- - - - 18.65% Shopping
(RESPONDENTS ANSWERED MORE THAN ONE CATEGORY, CAUSING TOTAL TO BE
GREATER THAN 100%)
The Internet has quickly become a mainstream component of everyday
life. In June 1998 it was estimated that there were approximately 37
million North Americans on-line.
Accessing the Internet is now the third most popular use of computers behind
playing games and word processing.
The Internet has created a whole new level of commercial transactions
called e-Commerce.
Today it is possible to buy everything from groceries to a car on-line.
A recent Roper Starch back-up survey conducted in June 1998 indicated
that 75% of people on-line have used the Internet to research an item
and 22% have actually made a purchase via the Web. A poll commissioned by
the Information Technology Association of America in early 1998 estimated
that 15% of all adult Americans have used the Internet to make a purchase.
While research shows varying results regarding the use of the Internet, it
is clear that the growing numbers indicate that the Internet will be one of
the most important tools for both businesses and individuals in the coming
years.
People are spending more time on-line, both at home and at work. In 1994,
only three million Americans were connected to the Internet. A joint study
by IDC and Relevant Knowledge claims that home Internet users will grow to
102 million in 2002 and the percentage using the Internet for electronic
commerce will grow to 50%. The U.S. Department of Commerce estimates that
Internet traffic is doubling every 100 days.
Conservative estimates put the number of worldwide users of the Internet at
60 million with nearly 70% living in Canada or the United States. eMarketer
predicts that Asia/Pacific Rim, South America and several underdeveloped
parts of the world will have more Internet users than the U.S. by the year
2000. By the year 2002, it is expected that there will be 228 million users
worldwide, with American users representing only 37% of such user base.
7.
True globalization of Internet use and electronic commerce will occur over
the next few years due to:
- - - - the deregulation and lower costs of telecommunications in
previously controlled markets.
- - - - increased computer use and modem penetration
- - - - the attraction of electronic commerce to foreign businesses
looking to draw revenues from a worldwide market
E-COMMERCE
Electronic Commerce ("e-Commerce") is the buying and selling of information,
products or services via computer networks. e-Commerce is allowing buyers
and sellers to communicate directly rather than through third parties.
Consumer oriented industries, such as travel, where service and information
play a large part in the buying process, are becoming important e-commerce
participants. Generally speaking, the more time consuming and difficult a
purchase category is, the more likely it is that consumers will use the
Internet versus standard means.
An e-commerce study by DePaul University found that 60% of Internet users
aged 30 to 49 years have already made at least one purchase electronically.
Other studies estimate that between 15% and 24% of all Internet users have
made a purchase on-line. A report recently released by the Deloitte &
Touche Consulting Group estimates that by the Year 2000, e-commerce will
grow by 300% and that many businesses will be conducting over half of their
business over the Internet.
A report by eMarketer concludes that consumer e-commerce will grow to $26.6
billion US by 2002 and business-to-business e-commerce will climb to $268
billion US from an estimated $5.6 billion in 1997.
The U.S. Department of Commerce has suggested that e-commerce will surpass
$300 million in the next two years. This is partially based on their
estimate that Internet usage is doubling every 100 days.
COMPETITIVE ADVANTAGES
It is anticipated that the Company will possess three distinct competitive
advantages:
(i) LOW COST: The Company proposes to design and maintain an
interactive and integrated website capable of providing
information on an extensive list of computer related products
and services. The estimated cost to create the site is $5,000,
and another $1,000 per month will be required to maintain the
site.
8.
The vendors and manufacturers represented by the Company will
pay a commission on sales of their listed items. Commission
rates vary between 8% and 10%.
Traditionally, most manufacturers and vendors have relied on
sales calls, trade shows and print materials such as
brochures and directories to promote their products. Print
materials are costly, become outdated quickly and have a
high cost of distribution. A website may be updated with
photos and text in a very timely and cost effective manner.
Special limited time promotions, for example, may be featured
and conveyed to a much wider potential audience than print
media. A website may also feature downloadable multimedia
presentations, which can be a strong sales tool for some
software vendors.
(ii) CUSTOMER FOCUS: A numbers of young computer users prefer
shopping on-line. The Company will target this customer base.
Users who visit the site will be asked questions relating to
their shopping needs and preferences. The Company will process
this information and, based on an understanding of its users
needs will select the right type of products for sale on its
website.
(iii) PRODUCT LEADERSHIP: As the Company's site evolves, it will
provide additional information about specific product in a more
detailed fashion, utilizing the services of renowned media
experts in the industry.
REVENUE PROJECTIONS
It is envisaged that the Company will earn revenues in the form of
commissions and advertising fees. It is anticipated that Vendors will remit
to the Company commissions ranging between 8% and 10% for product sales
through the Company's website. In addition, banner advertising and website
links are projected to generate revenues of $1.6 million per year by
the 5th year of the Company's operations. Operating costs, including staff,
technology, maintenance and selling and administrative are expected to be
$1.0 million by Year 5. Initial capital raised in the amount of $18,750 is
being used to develop software, working capital, and capital assets.
BUSINESS OBJECTIVES USING THE INTERNET
- - - - Use the internet as an improvement to the current business
communications environment, and as an adjunct to the Company's
advertising and marketing strategy, or part of an on-line sales
effort.
- - - - Increase corporate name recognition in a low-cost manner.
- - - - To survey, and to be in regular communications with, customers.
- - - - To sell the Company's product globally.
- - - - The Company's target customer profile fits the demographics of the
internet user community.
- - - - To match the Company's communications network to the internet
communications environment.
9.
THIRD PARTY INTERNET SERVICE PROVIDER (ISP)
The Company will enter into an agreement with its chosen ISP that will
clearly outline the terms and conditions of service.
The contract will specify the level of performance to be delivered by the ISP
to ensure that the Company's clients are not met with busy signals or "downed"
systems. The Company and the ISP will outline the amount of "uptime" and
acceptable "downtime" that can be expected. The Company will require that
there is limited downtime so as to prevent lost sales opportunities.
MARKETING STRATEGY
As an Internet-based service, the Company will have a presence on the World
Wide Web. Key to the Company's success will be the strategic use of
Internet links and keywords. Its strongest product feature will be that
products offered by the Company will be sold at very competitive prices
pursuant to pre-existing contracts that the Company will have with
individual vendors.
The key to the successful marketing of the service will be strategic use of
the Internet itself as a marketing tool. The Company plans to develop an
effective marketing strategy that includes registering with key search
engines for information such as Excite, Yahoo and Alta Vista. The
Company may also choose to advertise on various internet portals.
The Company's services will also be outlined in various print materials
including brochures and inserts to be included in a variety of mail-outs
such as credit card bills or frequent flyer statements.
During the Company's initial marketing phase in United States, Canada and
Europe, local press will be targeted with press releases. Advertising
Will be purchased in key publications such as Internet World Magazine,
Computer Current and local newspaper Technology sections.
TARGET SEGMENTS
The Company's target market segment is both college students and middle
to high income workers with access to the Internet and likelihood to
participate in e-commerce. As nearly as can be determined from independent
studies, this could be as many as 100 million potential users by the year
2002.
COMPETITION
The online commerce market, particularly over the Web, is new, rapidly
evolving and intensely competitive. In addition, the High Technology retail
industry is intensely competitive. The Company's current or potential
competitors include
(i) various online Computer Hardware and Software retailers and vendors
of other information-based products, including entrants into narrow
specialty niches,
(ii) a number of indirect competitors that specialize in online commerce or
derive a substantial portion of their revenues from online commerce, through
which retailers other than the Company may offer products and
10.
(iii)computer superstores, including CompUSA, Egg Head, Creative Computers,
and other large specialty High Technology and integrated media corporations,
many of which possess significant brand awareness, sales volume and customer
bases.
The Company believes that the principal competitive factors in its
market are brand recognition, selection, personalized services,
convenience, price, accessibility, customer service, quality of search
tools, quality of editorial and other site content, reliability and
speed of fulfillment. Many of the Company's competitors have longer
operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than the
Company.
Certain of the Company's competitors may be able to secure merchandise
from vendors on more favorable terms, devote greater resources to
marketing and promotional campaigns, adopt more aggressive pricing or
inventory availability policies and devote substantially more resources
to Web site and systems development than the Company. Increased
competition may result in reduced operating margins, loss of market
share and a diminished brand franchise. There can be no assurance that
the Company will be able to compete successfully against current and
future competitors.
OPERATIONS
After the acquisition of Capnet Group of Companies (see note 3 in the
financial section), the Company will have acquired a fully functional
internet portal and Electronic Commerce related company and will have
staff, office, equipment and established business accounts. The
employees of Capnet are expected to be primarily involved in customer
service, confirming order fulfillment by vendors and sales/negotiations
with vendors and suppliers.
It is presently anticipated that, if and when the Company becomes fully
operational, the Company will require additional employees. Specifically:
- One employee in accounting
- One employee in administration
- One employee in Information Systems
- Two employees in Marketing/Sales
The Company is not subject to any collective bargaining agreement. It
is anticipated that the Company's employees will be covered by an employee
stock option plan; however, at this stage, the terms of such a plan have
not been determined.
Although the primary contact with the Company will be via its website,
a toll-free telephone number will also be made available in the event
that clients need immediate customer service. The Company plans to develop
a marketing strategy for its services using trade shows, trade press
and strategic advertising on internet browsers such as Yahoo or Lycos.
11.
The Company expects to have a small, in-house accounting staff to handle
collections, payables and bookkeeping duties. The Company also expects to
have virtually no receivables because of the nature of its business
transactions. Payments will be received from client credit card charges
and the Company will be responsible for remitting payments to the relevant
vendor or supplier a net of commissions.
RESULTS OF OPERATIONS
A. REVENUES--The Company is a development stage enterprise that has
earned no revenue since its inception. The Company believes that future
revenues will result largely from sales of items from its internet
computer stores, advertising space on the Company's website, and
related sponsorship programs by prospective vendors or manufacturers.
B. COST OF REVENUE-Since its inception, the Company has incurred no
costs of revenues. The Company expects that future cost of revenues
will consist of payments to third parties from resale of their goods,
Internet Service Providers (ISP, graphic artists, royalties, and profit
participation payable to strategic alliance partners and others.
C. PRODUCT DEVELOPMENT EXPENSES-Product development expenses consist
principally of website and other software engineering, graphic design,
certain non-recoverable advances to artist, artist relations,
telecommunications charges, and cost of computer operations, including
related salaries, rent and depreciation, that support the Company's
business.
D. SALES AND MARKETING EXPENSES-Since its inception, the Company has
incurred no sales and marketing costs. The Company expects that future
costs will consist primarily of costs associated with the Company's
various strategic alliances, external advertising, promotion, trade
show, advertising sales and personnel expenses associated with
marketing of the Company's website.
E. GENERAL AND ADMINISTRATIVE EXPENSES-General and administrative
expenses currently consist of management consulting fees, accounting,
legal and expenditures for applicable overhead costs. The Company
expects general and administrative expenses to continue to increase in
absolute dollars as the Company Expands its staff and incurs additional
costs related to the growth of its business.
F. LACK OF COMMITMENT AND ORDERS-There are currently no commitments for
purchase of any of the Company's products and services.
ITEM 3. DESCRIPTION OF PROPERTY
Pursuant to an oral agreement, the Company currently utilizes the
office of its sole shareholder, rent free in the city of Owings Mill,
Maryland, as its East Coast Regional Office, on a month-to-month basis.
The Company does not presently own or lease any properties and at this
time has no agreements to acquire any properties. The Company intends
or attempt to acquire assets or a business for cash and/or in exchange
for its securities which assets or business that this is determined to
be desirable for its objectives. The Company also maintains an office
12.
space on a rent-free basis in the city of Los Angeles, California
offered by Anthony C. Dike, whose assets-"Capnet Group of Companies"
(see note 3) is being acquired by the Company, until the Company
successfully consummates the proposed merger or acquisition. During the
period of negotiation and upon completion of contemplated acquisition
of Capnet Group of Companies, the Company will maintain its executive
offices at 900 Wilshire Blvd., Suite 500, Los Angeles, California. The
Company also intends to host its Internet Web Server at the same facility.
The Company plans to move to different facilities as its customer base
expands and it upgrades its equipment.
The Company has no investments in real estate, securities, or other
forms of property
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding ownership of the
Company's Common Stock by each person known by the Company to be the
beneficial owner of more than 10% of the outstanding Common Stock, by
each director and by each executive officer of the Company. All shares are
held beneficially and of record, and each recorded stockholder has sole
voting, investment and dispositive power.
Shares Percentage of
Beneficially Shares
Name Owned Owned
Charles Okehie(1) 650,000 85.0
(1) Director and/or Officer of the Company
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
Pursuant to the Company's Bylaws, each officer and director will serve
until the next annual meeting of the shareholders or until their death,
resignation, retirement, removal, or disqualification, or until their
successors have been duly elected and qualified. Vacancies in the
existing Board of Directors are filled by majority vote of the
remaining Directors. Officers of the Company serve at will of the Board
of Directors. There is no family relationship between any executive
officer and director of the Company.
The following sets forth information concerning the principal
Executive officers and Directors of the Company:
Name Positions
Charles Okehie Director, President, Chief Financial Officer
and Secretary
The following sets forth certain biographical information pertaining to
the directors and officers of the Company:
Charles Okehie
Mr. Okehie has served as Director, President, and Chief Financial Officer
and Secretary since October 1998. From September 1982 to present, Mr. Okehie
has been working as an engineer with Maryland Highway Administration.
13.
ITEM 6. EXECUTIVE COMPENSATION
Pursuant to an oral agreement, the Company's sole director and officer
will not receive any remuneration for his services but will be reimbursed for
expenses, if any, incurred on behalf of the Company. Future compensation to
the officers and or directors will be decided by the Board of Directors.
Such transactions will not be conducted at arm's length.
ITEM 7. CERTAIN TRANSACTIONS WITH MANAGEMENT
On October 13, 1998, the Company issued 650,000 shares of its Common
Stock, par value $.001, to its sole shareholder who serves as sole
director and officer of the Company for a total consideration of $3,524.
ITEM 8. DESCRIPTION OF CAPITAL STOCK
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock
with a par value of $.001 per share. There are 957,500 shares of Common Stock
outstanding held by 58 stockholders as of February 8, 1999, the closing date
of the offering.
Holders of Common Stock are entitled to one vote per share in each
matter to be decided by stockholders. The Common Stock has no redemption
provisions and the holders thereof have no preemptive rights. Holders of
Common Stock are entitled to receive ratably such dividends, if any, as the
Board of Directors may declare from time to time out of funds legally
available thereof. Upon liquidation of the Company, after provisions for
payment of all of the Company's debts and obligations and outstanding
Preferred Stock, if any, the holders of Common Stock may share ratably in
the Company's assets. The outstanding shares of Common Stock are fully paid
and non-assessable. The shares of Common Stock included in the units
offered hereby, upon payment therefor, will be fully paid and non-assessable.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of Preferred
Stock with a par value of $.001 per share. The Board of Directors is
authorized to divide any or all of the Preferred Stock into series and to
fix and determine the relative rights and preferences of the shares of each
series so established. The Board of Directors, without stockholder approval,
could issue the Preferred Stock with conversion and/or voting rights superior
to those of the Company's shares of Common Stock. No Preferred Stock is
currently outstanding nor is there in effect any Board of Directors'
resolution with respect thereto.
Transfer Agent
The transfer agent for the shares of Common Stock is Corporate Stock
Transfer, Inc., 370 17th Street Suite 2350, Denver Colorado 80202.
14.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
Presently, the Company's stock is not listed for sale on any exchange or
trading medium. The Company intends to seek the listing of its Common
Stock on the OTC Electronic Bulletin Board upon the effectiveness of this
filing. Until such time, there are no public market for the Company's
Common Stock.
HOLDERS
There were 58 holders of the Company's Common Stock as of February 8th, 1999,
the closing date of the offering.
DIVIDENDS
Holders of the shares of Common Stock and Preferred Stock, if any, are
entitled to dividends when, as and if declared by the Board of Directors
out of funds legally available therefor. The Company has not paid any
dividends on its Common Stock and intends to retain earnings, if any, to
finance the development and expansion of its business. Future dividend
policy is subject to the discretion of the Board of Directors and will
depend upon a number of factors, including future earnings, capital
requirements and the financial condition of the Company.
RESALE RESTRICTIONS
The offering price of the shares of Common Stock sold by Company was
arbitrarily determined by management of the Company. The offering price
does not bear any relationship to assets, book value, or earnings of
the Company.
- - --- No restrictions or limitations on resale are believed to apply to
the securities issued, other than restrictions on resale, which may
apply under the securities or "Blue Sky" laws of certain states in
which such resale may occur of such restrictions.
- - --- There are no independent bank or savings and loan association or
other similar depository institution acting as escrow agent for
proceeds escrowed until minimum proceeds are raised.
REPORTS
The Company will furnish annual audited financial information to its
stockholders and such other interim reports as Management deems
appropriate.
ITEM 2. LEGAL PROCEEDINGS
The Company knows of no litigation pending, threatened or
contemplated, or unsatisfied judgement against it, or any proceedings
in which the Company is a party. The Company knows of no legal actions
pending or threatened or judgment entered against any officer or director
of the Company in his capacity as such. There has been to date no petition
under the bankruptcy Act or any State insolvency law filed by or against
the Company or its officers, Directors or other key personnel.
15.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING
There have been no changes in, or disagreement with, the Company's
independent accountant. The company's principal independent accountant
has not resigned or been dismissed. During January 1999, Mr. Andrew
Smith, Certified Public Accountant, of Williams & Tucker Accountancy
Corporation located in Long Beach California was engaged as the principal
accountant to audit the Company's financial statements.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On December 5, 1998, the Company began a private stock offering to
raise $35,000 of additional capital. The offering was for 70 units. Each
unit consisted of 5,000 shares of Common Stock at $500 per unit. As of
the date hereof, the Company has received proceeds of $12,000.
Subsequent to the balance sheet of December 31, 1998, an additional 187,500
common shares were subscribed in consideration for cash and services
performed in the amount of $18,750. Total shares subscribed as of the end
of the offering on February 8, 1999 were 307,500 shares in addition to
650,000 common shares issued and outstanding. Total shares committed
and/or outstanding as of the end of the offering on February 8, 1999 were
957,500.
A total of 58 Stock Certificates were issued by the transfer agent at the
end of the offering on February 8, 1999, of which 32 individuals purchased
their stock in cash as a group under the umbrella of "Metro South Medical
Group" and subsequently distributed these shares amongst themselves; 15 of
the shareholders paid for their stock with personal check, one of the
shareholders which happened to be a Corporation paid for its' stock
through a combination of corporate check and conversion of debts owed to it
by the Meridian Holdings, Inc., into equity, in the form of common stock;
four of the shareholders paid for their stock with United States Postal
Services Money Order; Six of the Shareholders received stock as a form of
payment for services they had rendered on behalf of Meridian Holdings, Inc.
These securities were issued under the REG D 504 Exemption.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Colorado Corporation Code, the Company's By-laws
provide for the indemnification of any person (including his estate)
made or threatened to be made a party to any suit or proceedings, whether
civil or criminal, by reason of the fact he was a director, or officer of
the corporation or served in the same capacity for another entity at the
request of the Company, against judgements, fines, amounts paid in
settlement and reasonable expenses, including attorney fees actually and
necessarily incurred as a result of such threat, suit or proceeding, or
any appeal therein, to fullest extent permitted by the Colorado Corporate
Code.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to officers and directors, the
Company acknowledges that in the opinion of Securities and Exchange
Commission, such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable.
16.
Part III
EXHIBITS INDEX
Exhibit A Articles of Incorporation (filed in paper)
Exhibit B Bylaws of Meridian Holdings, Inc. (filed in paper)
Exhibit C Letter of Intent to Acquire Assets.(included with filing)
17.
PART F/S
FINANCIAL INFORMATION
Meridian Holdings, Inc. is a Colorado Corporation organized on
October 13, 1998. The Company was formed to become an Internet retailer
of computer software and related hardware products. Since incorporation,
the Company's activities have been limited to capital formation.
On October 13, 1998, the Company issued 650,000 shares of its common
stock to its sole officer and director for a consideration of $3,524. On
December 5, 1998, the Company began a private stock offering to raise
$35,000 of additional capital. The offering was for 70 units. Each unit
consisted of 5,000 shares of Common Stock at $500 per unit. As of the
date hereof, the Company has received proceeds of $12,000. Subsequent to
the balance sheet of December 31, 1998 an additional 187,500 common
shares were subscribed in consideration for cash and services performed
in the amount of $18,750. Total shares subscribed as of the end of the
offering on February 8, 1999 were 307,500 shares in addition to 650,000
common shares issued and outstanding. Total shares committed and/or
outstanding as of the end of the offering on February 8, 1999 were 957,500.
These securities were sold under the REG D 504 Exemption.
The proceeds of the offering will permit the Company to conduct only
nominal operations. The Company will be required to obtain significant
amounts of additional capital. There can be no assurance that such
additional capital will be made available to the Company or made available
on satisfactory terms. In the absence of such additional capital,
Management may recommend the liquidation of the Company in which event
stockholders will loose any value their investment may have had.
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Signed this 1st day of April 1999 by
s/ Charles Okehie
President and CEO
17.
MERIDIAN HOLDINGS, INC.
(A Development Stage Company)
AUDITED FINANCIAL STATEMENTS
For the Period
October 13, 1998 to December 31, 1998
Table of Contents
LETTER TO THE BOARD OF DIRECTORS .................................2
BALANCE SHEET ...................................................4
STATEMENT OF STOCKHOLDERS' EQUITY ...................................5
STATEMENT OF CASH FLOWS .............................................6
NOTES TO FINANCIAL STATE.... ........................................7
18.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Meridian Holdings, Inc.
We have audited the accompanying balance sheet of Meridian Holdings, Inc.,
a development-stage company, as of December 31, 1998 and the related
statements of stockholders' equity and cash flows for the period October 13
to December 31, 1998. Our responsibility is to express an opinion on these
financial statements based on our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Meridian Holdings, Inc.,
as of December 31, 1998 and the results of their operations and their cash
flows for the period October 13 to December 31, 1998 in conformity with
generally-accepted accounting principles.
WILLIAMS AND TUCKER ACCOUNTANCY CORPORATION
Long Beach, California
January 6, 1999
19.
Meridian Holding, Inc.
(A Development Stage Company)
Balance Sheet
December 31, 1998
Assets
Current Assets
Cash $ 6,176
Property, Plant, and Equipment=20
Net of Accumulated Depreciation (Note 1) 825
Organization Costs (Note 1) 10,524
Total Assets $ 17,524
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 2,000
Stockholders' Equity (Note 2)
Common Stock (50,000,000
shares authorized, par
value $0.001, 650,000 shares
issued and outstanding) 650
Additional Paid in Capital 2,874
Common Stock Subscribed 12,000
Total Stockholders' Equity 15,524
Total Liabilities and Stockholders' Equity $ 17,524
See accompanying notes and independent auditor's report
20.
Meridian Holding, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
For the Period
October 13 to December 31, 1998
Common =20
Retained Common Paid in Stock
Earnings Stock Capital Subscribed Total
Balance October 13, 1998 $ - $ - $ - $ - $ -
Net Income - -
Common Shares Issued 650 2,874 3,524
Subscribed Shares - 12,000 12,000
Balance December 31, 1998 - 650 2,874 12,000 15,524
Subscribed Shares - - - 18,750 18,750
Balance February 8, 1999
(Filing date unaudited) $ - $ 650 $2,874 $30,750 $34,274
See accompanying notes and independent auditor's report
21.
Meridian Holdings, Inc.
(A Development Stage Company
Statement of Cash Flows
For the Period October 13, 1998 to December 31, 1998
Cash Flows from Operating Activities
Increase (Decrease) in Accounts Payable 2,000
Cash Provided by Operating Activities 2,000
Investing Activities
Acquisition of Fixed Assets (825)
Organization Costs (10,524)
Net Cash Used by Investing Activities (11,348)
Cash Flows from Financing Activities
Capital Contributions 3,524
Proceeds From Common Stock Subscribed 12,000
Cash Provided by Financing Activities 15,524
Increase (Decrease) in Cash 6,176
Cash Balance October 13, 1998 -
Cash Balance December 31, 1998 $ 6,176
22.
MERIDIAN HOLDINGS, INC.
Notes to Financial Statements
December 31, 1998
NOTE 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies of Meridian Holdings, Inc.
(the "Company") is presented to assist in understanding the Company's
financial statements. These financial statements and notes are the
representation of the Company's management, which is responsible for the
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements
Nature of Operations
The Company was organized under the laws of the State of Colorado and was
incorporated October 13, 1998. Since incorporation, the Company's activities
have been limited to capital formation. The Company intends to become an
Internet retailer of computer software products, when operational. Costs
accumulated during this period have been capitalized and will be amortized
over a sixty month period.
Use of Estimates
Management will use estimates and assumptions in preparing financial
statements (e.g. depreciation). Those estimates and assumptions affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and reported revenues and expenses.
Fiscal Year
The Company operates on a December 31st year-end.
Income Recognition
The Company prepares its financial statements and federal income taxes on
the accrual basis of accounting. The nature of the business is such that the
Company receives stock and other necessary materials from the customers for
processing. As such no inventories of any significance are maintained.
NOTE 2 - Capitalization
The Company is authorized to issue 10,000,000 shares of Preferred Stock, per
value $.001, and 50,000,000 shares of Common Stock, par value $.001.
650,000 shares of Common Stock were issued for cash consideration of $3,524.
As of December 31, 1998 the Company has received $12,000 cash and a
Receivable for $900 in consideration for 129,000 shares. Proceeds have been
used by the Company primarily for offering costs and the acquisition of
equipment and resources to support it's intended operations.
NOTE 3 - Recent Developments
Subsequent to the balance sheet of December 31, 1998 an additional 187,500
common shares were subscribed in consideration for cash and services
performed in the amount of $18,750. Total shares subscribed as of
February 8, 1999 were 307,500 shares in addition to 650,000 common shares
issued and outstanding. Total shares committed and/or outstanding as of
February 8, 1999 was 957,500.
23.
Also the Company has entered into a non-binding Letter of Intent
(the "Letter of Intent") as of March 24th 1999, pursuant to which the
Company has the option to acquire 100% of certain Internet Related Assets
of Anthony C. Dike, in exchange for the Companies Common Stock.
These Assets include Capnet Group of Companies which includes
"Capnet.com d/b/a/ Capnet Gateway Online Services", and "Capnet IPA"
all owned and operated by Anthony C. Dike.
"Capnet.com" is an internet based information and management services
company, with focus on Internet Content and Electronic Commerce.
"Capnet IPA" is a healthcare transaction based management company that
utilizes the Internet to provide management services to contracted
healthcare entities on a fee based transaction model.
Capnet IPA had approximately $0.5 Million sales for the year ending
December 1998, with a projected revenue of $1.5 million for the year
ending December 1999. Capnet has a website located at
http://www.capnet.com, that will become the portal for users of the
Company's services. The website will undergo a design upgrade in order to
meet the Companies objectives.
The Company plans to use proprietary internet software that it is
currently developing to independently enhance Capnet.com existing
Website with the plan to create a unique virtual "Shopping Center" and
"Information Portal".
By acquiring Capnet Group of Companies, an established service
company, the company will acquire an established client base. The
acquisition of Capnet Group of Companies will give the company access
to management personnel with expertise and experience in the Internet
Electronic Commerce related business. Capnet.com has an existing
infrastructures, such as a Corporate office located at 900 Wilshire
Blvd, Suite 500, Los Angeles California. The transaction contemplated
calls for an exchange of shares and is contingent solely upon certain
working capital commitments, which are expected to be fulfilled in the
near future. The parties contemplate a final Closing will take place
on or before May 1st, 1999. Upon completion of Contemplated
transaction, Anthony C. Dike, will be elected into the board of
director of Meridian Holdings, Inc., and assume control of the Company
on or before Closing.
24.
EXHIBIT C
LETTER OF INTENT
Mr. Anthony C. Dike
Principal
Capnet Group of Companies
900 Wilshire Blvd., Suite 500
Los Angeles, CA 90017
RE: Letter of Intent
Dear Mr. Anthony C. Dike:
This letter sets forth our preliminary understanding concerning the
purchase by Meridian Holdings, Inc., a Colorado Corporation
("Meridian"), of the equity interest in Capnet Group of Companies
(a sole Proprietor company )("capnet") (such transaction, the "Asset
Purchase").
(1) Meridian Holdings shall acquire, and Anthony C. Dike shall sell,
100% of Capnet Group of Companies in exchange for 25,000,000 Shares of
Common Stock of Meridian Holdings, Inc., at 0.001 par value.
(2) In connection with the Asset Purchase contemplated hereby, Capnet
shall use its commercially reasonable efforts to raise Five Million
Dollars (US$5,000,000) through a private placement as defined under the
Securities Act of 1933 (the "Private Placement"). The successful
completion of the Private Placement is condition precedent to the
consummation of the Asset Purchase.
(3) Meridian Holdings, Inc. and Anthony C. Dike, shall negotiate in
good faith with a view to entering into a definitive asset purchase
agreement (the "ASSET PURCHASE AGREEMENT") providing for the Asset
Purchase, which Asset Purchase Agreement shall contain, among other
things and in addition to the other terms of this Letter of Intent
includes the following provisions:
(i) Meridian Holdings, Inc. represents and warrants to Anthony C. Dike
that (both as of the date of the Asset Purchase Agreement and of the
closing of the Asset Purchase (the "Closing") unless otherwise specified
herein):
(ii) Meridian Holdings, Inc. is a corporation duly organized, existing
and in good standing, under the laws of the State of Colorado.
(iii) As of the Closing, the authorized capital stock of Meridian Holdings,
Inc., will consist of 50,000,000 shares of Common Stock, par value $0.001
per share, of which 25,957,500 shares will be issued and outstanding prior
to the successful consummation of the Private Placement.
(iv) There are no outstanding subscriptions, warrants, options, calls or
commitments of any character entitling any person or entity to
purchase or otherwise acquire any capital stock or other securities or
other equity interests of Meridian Holdings, Inc.
25.
(i) Anthony C. Dike represents and warrants to Meridian holdings,
Inc. that (both as of the date of the Asset Purchase Agreement and
of the closing , unless otherwise specified herein.)
(iii) Except as set forth on its financial statements, to be provided by
Capnet prior to the execution of the Asset Purchase Agreement, or such
as may have arisen in the ordinary course of business, there subject
to consummation of the obligations, contingent or otherwise, of Capnet,
or otherwise affecting Capnet Group of Companies or its assets, which
debts, liabilities or obligations would substantially alter the
financial condition of Capnet Group of Companies.
(iii) The financial statements of Capnet delivered to Meridian
Holdings, Inc. are accurate and complete, have been prepared in
accordance with generally accepted accounting principles, consistently
applied throughout the period indicated, and fairly present Capnet's
financial position, results of operations and cash flow at the
respective dates thereof and for the periods therein indicated.
(iv) Other than the Asset Purchase contemplated hereby, there are no
outstanding subscriptions, warrants, options, calls or commitments
of any character entitling any person or entity to purchase or
otherwise a acquire any capital stock or other securities or other
equity interests of Capnet.
(vii) Since the date of its last financial statement, there have not
been, and during the period between the execution of the Asset Purchase
Agreement and the Closing there will not be, any material adverse
changes in the financial condition affecting Capnet, other than those
arising from the ordinary course of business.
(viii)Except as disclosed to Meridian Holdings, Inc., Capnet has not
been involved in any litigation, government investigation or other
government proceeding and, to the best knowledge of Capnet and its
existing shareholders, no litigation, government investigation or other
government proceeding is threatened against Capnet.
Capnet Group of Companies which includes Capnet.com d/b/a/ Capnet
Gateway Online Services, and Capnet IPA all owned and operated by
Anthony C. Dike. Capnet.com is an internet based information and
management services company, with focus on Internet Electronic Commerce
and Content provider.
Capnet IPA is a healthcare management company that utilizes the
Internet to provide management services to contracted healthcare
entities on a fee based transaction model.
As a condition precedent to the consummation of the Asset
Purchase, the terms of the definitive Asset Purchase Agreement shall
have been approved by the shareholders of both Capnet Group of
Companies and Meridian Holdings, Inc.
The officer of each of Capnet Group of Companies (Anthony C. Dike)
and Meridian Holdings, Inc., signing the Asset Purchase Agreement will
be duly authorized by the respective board of directors of each such
company.
The number of (i) persons on Meridian Holdings, Inc. board of
directors, and (ii) officers shall be increased upon consummation of the
Asset
26.
Purchase appropriately. At any time prior to the Closing, the parties may,
by written agreement approved by their respective boards of directors,
amend, modify or waive compliance with, any of the conditions, covenants or
provisions of the Asset Purchase Agreement. The Asset Purchase Agreement and
the legal relations between the parties shall be governed by and construed
in accordance with the internal law of the State of California.
(4) Anthony C. Dike, and Meridian Holdings, Inc. agree that all the
information received by either of them in connection with the Asset
Purchase, excluding any information which is generally known to the
public or subsequently becomes generally known to the public in a
manner not resulting directly or indirectly from any act or omission on
the part of such party in violation of this paragraph, shall be deemed
to be confidential information, and such confidential information shall
not be disclosed by such party receiving it to any other person or
entity, except to its directors, officers, employees, agents or
affiliates to whom or which disclosure is reasonably necessary and
except as may otherwise be required by any applicable law.
(5) The Closing shall occur on or about May 1st, 1999 or as soon as
possible after the completion of the Private Placement.
(6) Except for paragraph 4 above, this Letter of Intent represents
expression of intent only. Accordingly, neither Meridian Holdings, Inc.
nor Anthony C. Dike will be bound by any terms of this Letter of Intent
other than as set forth in the preceding sentence. Instead, the Asset
Purchase Agreement, if and when executed, will be the binding agreement
between the parties. Unless the Asset purchase agreement is entered
into, neither party shall be under any obligation to the other, regardless
of any negotiations, agreements or undertakings between, or actions taken by,
any party, except as set forth in the first sentence of this paragraph.
(7) This Letter of Intent may be signed in multiple counterparts, each of
which shall be deemed to be an original, and all such counterparts shall
constitute but one instrument.
(8) For purposes of construction and interpretation, Meridian Holdings, Inc.
and Anthony C. Dike, agree that this Letter of Intent shall be governed by,
and construed in accordance with, the law of the State of Colorado, without
regard for the conflict of law principles thereof. The contemplated
transactions involve exchange of stock, with no expected Tax consequences.
If you agree that this letter correctly sets forth our mutual intent, please
so indicate by signing the enclosed copy of this letter and return it to me.
Sincerely,
Meridian Holdings, Inc.
By: s/ Charles Okehie
President/CEO
27.
Agreed and Accepted this 24TH day of MARCH, 1999
FOR CAPNET GROUP OF COMPANIES.
By: s/ANTHONY C. DIKE
Principal
