SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[ x ] Quarterly report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the quarterly period ended: September 30, 2000
[ ] Transition report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from __________ to
__________
Commission File No. 0-28223
MERIDIAN USA HOLDINGS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Florida 65-0510294
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1356 N.W. 2nd Avenue, Boca Raton, FL 33432
(Address of Principal Executive Offices)
(561) 417-6800
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) 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 requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of October 5, 2000, the issuer had issued and outstanding 6,336,399 shares of
its common stock, par value $0.001 per share.
Transitional Small Business Disclosure Format (check one): Yes No X
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MERIDIAN USA HOLDINGS, INC.
INDEX TO FORM 10-QSB
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1 Consolidated Financial Statements
Consolidated Balance Sheet at September 30, 2000 (unaudited) 2
Consolidated Statements of Operations for the three and nine
months ended September 30, 2000 and 1999 (unaudited) 3
Consolidated Statements of Cash Flows for the three and
nine months ended September 30, 2000 and 1999 (unaudited) 4
Notes to Consolidated Financial Statements 5
Item 2 Management's discussion and analysis or plan of operations 8
PART II- OTHER INFORMATION
Item 1 Legal proceedings 9
Item 2 Changes in securities and use of proceeds 9
Item 3 Defaults upon senior securities 9
Item 4 Submission of matters to a vote of security holders 9
Item 5 Other events 9
Item 6(a) Exhibits 9
Item 6(b) Reports of Form 8-K 10
Signatures 10
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MERIDIAN USA HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
ASSETS
Current assets:
Cash $ 19,987
Marketable securities - available-for-sale 6,315,246
Accounts receivable, net 148,055
Inventory 74,410
Advances - stockholders 99,000
Other current assets 19,969
----------------
Total current assets 6,676,667
Property and equipment, net 58,986
Deferred financing costs, net 426,889
Licensing agreement, net 156,933
----------------
$ 7,319,475
================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 103,558
Accrued expenses and other current liabilities 248,181
Loan payable 21,969
Current portion of note payable 2,420
----------------
Total current liabilities 376,128
----------------
Note payable, net of current portion 13,363
Convertible note payable, net of discount 7,038,138
Commitments and contingency -
Stockholders' deficiency:
Series I convertible preferred stock, par value
$1.00 - authorized 100,000 shares, 3,500 shares
issued and outstanding 3,500
Series II convertible preferred stock, par value
$.01 - authorized 8,500 shares, no shares issued
and outstanding -
Common stock, par value $.001 - authorized 40,000,000
shares, issued and outstanding 6,336,399 6,337
Additional paid-in capital 4,394,170
Accumulated other comprehensive income
- unrealized gain on marketable securities 42,231
Accumulated deficit (4,554,392)
----------------
Total stockholders' deficiency (108,154)
----------------
$ 7,319,475
================
See notes to consolidated financial statements
2
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<TABLE>
<CAPTION>
MERIDIAN USA HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- -------------- --------------- ---------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 175,233 $ 96,612 $ 846,961 $ 208,117
Cost of goods sold 111,387 112,526 528,019 164,093
--------------- -------------- --------------- ---------------
Gross profit 63,846 (15,914) 318,942 44,024
Selling, general and administrative 1,121,331 197,780 2,125,610 497,931
--------------- -------------- --------------- ---------------
Loss from operations (1,057,485) (213,694) (1,806,668) (453,907)
Other income (expense):
Interest income 30,946 - 43,234 -
Interest expense (496,646) - (549,698) -
--------------- -------------- --------------- ---------------
Other expenses, net (465,700) - (506,464) -
--------------- -------------- --------------- ---------------
Net loss $ (1,523,185) $ (213,694) $ (2,313,132) $ (453,907)
=============== ============== =============== ===============
Net loss per common share - basic and diluted $ (0.24) $ (0.04) $ (0.38) $ (0.09)
=============== ============== =============== ===============
Weighted average number of common shares
outstanding - basic and diluted 6,248,066 5,197,540 6,160,299 4,804,046
=============== ============== =============== ===============
Other comprehensive loss:
Net loss $ (1,523,185) $ (213,694) $ (2,313,132) $ (453,907)
Unrealized gain from marketable securities 49,119 - 42,231 -
--------------- -------------- --------------- ---------------
Comprehensive loss $ (1,474,066) $ (213,694) $ (2,270,901) $ (453,907)
=============== ============== =============== ===============
</TABLE>
See notes to consolidated financial statements
3
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<TABLE>
<CAPTION>
MERIDIAN USA HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
-------------------------------
2000 1999
-------------- --------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,313,132) $ (453,907)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 193,199 7,696
Common stock issued for services 272,125 -
Amortization of debt discount 396,060 -
Changes in current assets and liabilities:
Accounts receivable (104,762) (14,472)
Inventory (27,226) (78,788)
Other current assets (19,969) (1,500)
Accounts payable (48,792) (30,984)
Accrued expenses and other current liabilities (93,564) 15,663
-------------- --------------
Net cash used in operating activities (1,746,061) (556,292)
-------------- --------------
Cash flows from investing activities:
Purchase of marketable securities (6,273,015) -
Capital expenditures (54,766) -
-------------- --------------
Net cash used in investing activities (6,327,781) -
-------------- --------------
Cash flows from financing activities:
Repayment of advances from stockholders - (50,000)
Proceeds from note payable 16,955 -
Proceeds from loans payable 21,969 -
Principal payments on notes payable (1,172) -
Proceeds from convertible notes 8,000,000 -
Debt issue costs (602,666) -
Repurchase of common stock - (50,000)
Proceeds from issuance of common stock and warrants 475,000 695,356
Capital contribution 116,044 -
-------------- --------------
Net cash provided by financing activities 8,026,130 595,356
-------------- --------------
Net (decrease) increase in cash (47,712) 39,064
Cash, beginning of year 67,699 39,680
-------------- --------------
Cash, end of period $ 19,987 $ 78,744
============== ==============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year:
Interest expense $ 36,971 -
============== ==============
Income taxes $ - -
============== ==============
Non-Cash Flow Investing and Financing Activities:
Issuance of common stock and convertible preferred
stock in reverse merger $ - $ 3,377
============== ==============
Issuance of common stock related to reverse merger $ - $ 620
============== ==============
Issuance of common stock subscriptions receivable $ - $ 201,794
============== ==============
Issuance of warrants from Cumberland agreement $ - $ 176,000
============== ==============
Issuance of warrants in conjunction with convertible
note payable $ 1,023,940 $ -
============== ==============
</TABLE>
See notes to consolidated financial statements
4
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MERIDIAN USA HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PREPARATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-QSB. Accordingly, they
do not include all of the information and disclosures required for annual
financial statements. These financial statements should be read in conjunction
with the consolidated financial statements and related footnotes for the year
ended December 31, 1999 included in the Form 10-KSB for the year then ended.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of September 30, 2000, and the results of operations and cash flows
for the three-month and nine-month periods ended September 30, 2000 and 1999
have been included.
The results of operations for the nine-month period ended September 30, 2000,
are not necessarily indicative of the results to be expected for the full year.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB as filed with the
Securities and Exchange Commission for the year ended December 31, 1999.
MARKETABLE SECURITIES
Investments in marketable securities are classified as available-for-sale and
are recorded at fair value with any unrealized holding gains or losses included
in accumulated other comprehensive income (loss), which is a component of
stockholders' deficiency.
NOTE PAYABLE
In May 2000, the Company entered into a note payable for $17,184, the proceeds
for which were used to acquire a vehicle. Such borrowing is secured by the
vehicle and bears interest at 9% per annum, payable in sixty monthly
installments.
CONVERTIBLE NOTES PAYABLE
On June 16, 2000, the Company entered into a convertible debt agreement with a
bank. Such agreement includes a convertible note payable for $8,000,000. This
note bears interest at 5.00% per annum and is automatically converted on June
15, 2001. The note may be converted prior to its mandatory conversion date by
either the Company or the note holder upon the satisfaction of certain
conditions. The note is convertible into Series II Convertible Preferred Stock
at one share for each $1,000 in debt, including accrued interest. The Company
5
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received net proceeds of $7,366,334 and recorded deferred financing costs of
$602,666, to be amortized over one year. In the event the Company is sold or
liquidated while any principal amount of the note is outstanding, the note will
be due upon demand, including accrued interest. On May 11, 2000, the Company
received bridge financing from the same note holders for $500,000, which debt
was satisfied upon issuance of the convertible note. The Company has recorded
$31,000 in interest expense.
Along with the convertible note, the Company issued 698,948 warrants to acquire
shares of the Company's common stock. The warrants are exercisable at $1.75 per
share and expire seven years from the date of issuance. The Company has recorded
these warrants as a discount to the convertible note for $1,357,922. The
discount was derived from the Black-Scholes option-pricing model based on the
following assumptions: expected stock price volatility 171%; risk-free interest
rate of 5.70%; and an expected 4 year life. The discount will be amortized as
interest expense over one year. With respect to such discount, the Company has
recorded amortization expense of $175,777 for the period ended September 30,
2000.
STOCKHOLDERS' DEFICIENCY
On August 17, 2000, with the approval of the shareholders of Company, the number
of authorized common shares was increased from 20,000,000 to 40,000,000.
Additionally, the number of options that can be granted under the Company's
stock option plan was increased to 1,000,000.
From March 1, 2000 through June 30, 2000, the Company's issued 450,000 shares of
its restricted common stock at $1.00 per share for $450,000. Additionally, the
Company granted 250,000 options to purchase shares of the Company's common
stock. The exercise price of the options issued was between $0.50 and $1.00 per
share of common stock.
In January 2000, the Company issued 5,000 shares of restricted common stock to a
member of the Company's advisory board. The Company has recorded $8,125 in
compensation to reflect this transaction.
On June 16, 2000, the Company amended its articles of incorporation to designate
Series II Convertible Preferred Stock ("Series II"). The Company authorized
8,500 shares of Series II stock, $.01 par value. Series II stock accrues
preferred dividends at 5% per annum and each share is convertible into
approximately 588 shares of the Company's common stock based upon a $1.70
conversion price where each Series II share converts into a $1,000 unit of
common stock. The conversion price may be adjusted one year from the date of
issuance. The adjusted conversion price would be the lower of $1.70 or the
average of the closing prices of the common stock for the ten-day period ending
one year from the date of issuance. Additionally, these shares have a right of
mandatory redemption ten years from the date of issuance.
On August 16, 2000, options to purchase 25,000 shares of restricted common stock
were exercised at $1.00 per share.
6
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On September 27, 2000, the Company issued 120,000 shares of restricted common
stock to a consultant for services rendered. The Company valued the restricted
common stock at $264,000 and recorded compensation expense.
COMMITMENT AND CONTINGENCY
Commitment:
On March 15, 2000, the Company entered into an employment agreement with an
executive. The agreement is for a term of two years with an annual compensation
of $90,000. Such executive will also be entitled to 1.5% of sales net of all
discounts, claims, allowances and bad debts. Additionally, this individual will
be granted 5,000 shares of the Company's common stock after the thirtieth day of
employment, such shares were subsequently issued in November 2000
Contingency:
In July 2000, an action was commenced against the Company by an individual
claiming to be entitled to a "finder's fee" in connection with the financing
transaction between the Company and U.S. Bancorp Investments, Inc. The
individual claims he is entitled to $50,000 plus 200,000 shares of the Company's
common stock. The Company denies the allegations and intends to vigorously
defend its position.
SUBSEQUENT EVENTS
On October 1, 2000, the Company entered into a five year consulting agreement
with a consultant. The consultant will provide sales and marketing services. The
Company paid $100,000 upon signing this agreement and will pay an additional
$250,000 in equal monthly installments over the term of the agreement.
On October 2, 2000, the Company entered into an agreement with its vice
president of finance for a term of one year. Under the agreement, this
individual will receive a salary of $90,000 per year. The Company has also
agreed to cover reasonably expected benefits and to issue 20,000 options to
purchase shares of the Company's common stock at $1.00 per share vesting at a
rate of 5,000 options per year commencing September 30, 2001.
On October 3, 2000, the Company entered into a five year lease for office space.
The lease shall commence on November 1, 2000 and monthly rental payments are
approximately $5,256. The monthly rent will increase by approximately 3% per
annum over the term of the lease.
In November 2000, the Company issued 30,000 shares of its common stock to
members of its board of directors and advisory board.
On November 7, 2000, the Company entered into a one-year endorsement agreement
with a professional athlete. This agreement gives the Company the right to
utilize this individual's likeness in its ChampionLyte product advertisements.
The individual received $60,000 and will receive $15,000 in shares, based on the
market price on the date of issuance, of the Company's restricted common stock.
Also, on November 7, 2000, the Company entered into a one-year agreement with a
consultant for sports marketing services. The Company has paid $10,000 and will
issue to the consultant 28,000 options to purchase shares of the Company's
restricted common stock at $0.50 per share. The options will be issued at a rate
of 7,000 options per quarter with the first 7,000 issued upon execution of the
agreement.
7
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Item 2 Management's Discussion and Analysis or Plan of Operations
RESULTS OF OPERATIONS
Meridian's net sales revenues for the three and nine months ended September 30,
2000 were $175,233 and $846,961, respectively, as compared to $96,612 and
$208,117, respectively, in the comparable periods of 1999. The increases were
attributable to continued expansion of the market for Meridian's Sweet `N Low
(R) brand syrups. Meridian's gross margin increased from 21% in the nine months
ended September 30, 1999 to 38% in the comparable 2000 period. This increase was
attributable primarily to lower margins in the 1999 period resulting from a
change in Meridian's co-packer during that period and lower than expected
pricing. Sales volume was relatively low in the 1999 period and, as a result,
the above two factors had a significant percentage impact on gross margin. The
margins achieved during the 2000 period are within the expected range for the
Company's business. Management believes that sales volume will continue to grow
and that, as Meridian's products become more well-established in the market,
margins will stabilize.
Selling, general and administrative expenses increased from $197,780 in the
third quarter of 1999 to $1,121,331 in the third quarter of 2000 and from
$497,931 in the first nine months in 1999 to $2,125,610 in the first nine months
of 2000. The increases were attributable primarily to six factors: (i) noncash
interest and amortization costs of $571,904 for the nine months ended September
30, 2000, associated with the U.S. Bancorp financing, which closed in June 2000;
(ii) $116,667 in accrued interest due to U.S. Bancorp Investments, Inc. that may
be converted into shares of the Company's Series II Preferred Stock; (iii) the
cost associated with the completion of development and introduction to the
market of Meridian's ChampionLyte (TM) sports refresher drinks (iv) the hiring
of various sales and other administrative personnel to support the continued
growth of the Company's products resulted in incremental period to period costs
of approximately $40,000 and $72,000 for the three and months ended September
20, 2000 (v) increased advertising and media expenses to support the Company's
product line which increased from approximately $18,000 and $25,000 for the
three and nine months ended September 30, 1999 to approximately $155,000 and
$601,000 in the comparable 2000 period and (vi) noncash compensation costs of
$264,000 and $272,125 for the three and nine months ended September 30, 2000,
associated with the issuance of common stock for consulting services rendered.
The costs associated with the U.S. Bancorp bridge loan, and the non-cash
compensation costs associated with the issuance of common stock for consulting
services rendered are non-recurring. These non-recurring costs aggregated
$264,000 and $303,125 respectively during the three and nine months ended
September 30, 2000.
Meridian had a net loss of $2,313,132 ($0.38 per share) during the nine months
ended September 30, 2000, as compared to a net loss of $453,907 ($0.09 per
share) during the comparable prior period.
LIQUIDITY AND CAPITAL RESOURCES
Meridian's available cash and marketable securities at September 30, 2000 were
approximately $6,335,000, as compared to approximately $79,000 at September 30,
1999. The increase in primarily attributable to the proceeds of Meridian's
issuance of its Series A Convertible Note to U.S. Bancorp Investments, Inc. in
June 2000 and to a lesser extent to increased sales of Meridian's products.
As a result of the U.S. Bancorp financing, management believes that is has
sufficient working capital to carry out its business plan for the operation and
expansion of its syrup business and for the introduction and growth of its
sports refresher drink for at least the next 15 to 18 months. In addition,
Meridian believes that operations will contribute to cash flow during the same
period.
8
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PART II - OTHER INFORMATION
Item 1 Legal Proceedings
In July 2000, an action was commenced against Meridian in Florida
Circuit Court, Palm Beach County, by an individual claiming to be entitled to a
"finder's fee" in connection with the financing transaction between Meridian and
U.S. Bancorp Investments, Inc. The individual claims he is entitled to $50,000
plus 200,000 shares of Meridian's Common Stock. Meridian denies the allegations
of the claim and has asserted affirmative defenses and set-off claims. Meridian
intends to continue to defend its interests in this action vigorously.
Item 2 Changes in Securities and Use of Proceeds
During the quarter ended September 30, 2000, Meridian issued the
following securities in transactions not registered under the Securities Act of
1933: (i) 120,000 shares of Common Stock were issued to a consultant for
services rendered, the Company recorded $264,000 in compensation expense in
relation to this issuance, and (ii) 25,000 shares of Common Stock were issued
upon the exercise of stock options at $1.00 per share.
Item 3 Defaults Upon Senior Securities
None.
Item 4 Submissions of Matters to a Vote of Security Holders
Meridian held its annual meeting on August 17, 2000. The following
individual were elected to the Company's Board of Directors: Joel Flig, Paul M.
Galant, Alan Posner, David Ravich, Ronald Shapss, and Mark Streisfeld.
The shareholders voted to amend the Company's 1999 Stock Incentive Plan
by increasing the number of authorized options thereunder to 1,000,0000. This
proposal was approved by 4,802,509 votes in favor, and 1,220 votes against.
Additionally, the shareholders voted in favor to amend the Company's
Articles of Incorporation to increase the authorized number of common stock to
40,000,000. This proposal was approved by 4,517,919 votes in favor, 1,209 votes
against, and 275,983 shareholders abstained from voting.
Item 5 Other Events
None.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits required by item 601 of Regulation S-B
9
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The following exhibits are incorporated by reference to Form 10-QSB
filed on November 2, 2000, to which this form is an amendment:
10.1 Employment Contract
10.2 Stock Option Agreement
10.2 Consulting Agreement
10.3 Consulting Agreement
10.4 Office Lease
(b) 27.1 Financial Data Schedule
(c) Reports on Form 8-K
No reports were filed during the period ended September 30, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
MERIDIAN USA HOLDINGS, INC.
By:/s/ Mark Streisfeld
Mark Streisfeld, President
By:/s/ Christopher A. Valleau
Christopher A. Valleau, Vice President, Finance
Date: December 8, 2000
10