MERIDIAN USA HOLDINGS INC
10QSB, 2000-11-02
SUGAR & CONFECTIONERY PRODUCTS
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(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
                                                               -----    -----



<PAGE>



                           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

<PAGE>
                   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:
     Convertible preferred stock,  par value $1.00  -
       authorized 1,000,000 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
<PAGE>
<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       $     80,082    $    846,961      $    191,587

Cost of goods sold                                              111,387             53,354         528,019           104,921
                                                           -------------      -------------   -------------     -------------

Gross profit                                                     63,846             26,728         318,942            86,666

Selling, general and administrative                           1,121,331            132,029       2,125,610           432,180
                                                           -------------      -------------   -------------     -------------

Loss from operations                                         (1,057,485)          (105,301)     (1,806,668)         (345,514)

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)      $   (105,301)   $ (2,313,132)     $   (345,514)
                                                           =============      =============   =============     =============

Net loss per common share - basic and diluted              $      (0.24)      $      (0.02)   $      (0.38)     $      (0.07)
                                                           =============      =============   =============     =============

Weighted average number of common shares
  outstanding - basic and diluted                             6,248,066          5,505,667       6,160,299         5,112,172
                                                           =============      =============   =============     =============

Other comprehensive loss:

Net loss                                                   $ (1,523,185)      $   (105,301)   $ (2,313,132)     $   (345,514)

Unrealized gain from marketable securities                       49,119                  -          42,231                 -
                                                           -------------      -------------   -------------     -------------

Comprehensive loss                                         $ (1,474,066)      $   (105,301)   $ (2,270,901)     $   (345,514)
                                                           =============      =============   =============     =============
</TABLE>























                 See notes to consolidated financial statements
                                        3
<PAGE>
<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)    $         (345,514)
     Adjustments to reconcile net loss to net cash
         used in operating activities:
         Depreciation and amortization                                             193,199                  6,333
         Common stock issued for services                                          272,125                      -
         Amortization of debt discount                                             396,060                      -
     Changes in current assets and liabilities:
         Accounts receivable                                                      (104,762)               (95,508)
         Inventories                                                               (27,226)               (71,983)
         Other current assets                                                      (19,969)                     -
         Accounts payable                                                          (48,792)                22,694
         Accrued expenses and other current liabilities                            (93,564)                41,423
                                                                        -------------------    -------------------
Net cash used in operating activities                                           (1,746,061)              (442,555)
                                                                        -------------------    -------------------

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                                                      -                (40,000)
         Sale of common stock                                                      475,000                605,779
         Capital contribution                                                      116,044                      -
                                                                        -------------------    -------------------
Net cash provided by financing activities                                        8,026,130                515,779
                                                                        -------------------    -------------------

Net (decrease) increase in cash                                                    (47,712)                73,224

Cash, beginning of year                                                             67,699                  3,632
                                                                        -------------------    -------------------

Cash, end of period                                                     $           19,987     $           76,856
                                                                        ===================    ===================

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                    $                -   $            620,000
                                                                        ===================    ===================
  Issuance of warrants in conjunction with convertible note payable     $        1,023,940   $                  -
                                                                        ===================    ===================

</TABLE>

                 See notes to consolidated financial statements
                                        4


<PAGE>

                  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

<PAGE>

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

<PAGE>

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.

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.



                                        7

<PAGE>

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 $80,082 and
$175,233,  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;  however,  decreased from 45% in the
nine months ended September 30, 1999 to 38% in the comparable 2000 period.  This
decrease was  attributable  primarily to greater  discounts  allowed by Meridian
relating in a change in the mix of Meridian's  customers from individual  retail
outlets to large national  chains.  This change led to  substantially  increased
sales revenues, but reduced margins.  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 $132,029 in the
third  quarter  of 1999 to  $1,121,331  in the  third  quarter  of 2000 and from
$432,180 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 $345,514  ($0.07 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 $77,000 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 18 months.  In addition,  Meridian
believes that operations will contribute to cash flow during the same period.

                                        8

<PAGE>

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

<PAGE>


             The following exhibits are filed as a part of this report:

         (a)      10.1     Employment Contract
                  10.2     Stock Option Agreement
                  10.3     Consulting Agreement
                  10.4     Consulting Agreement
                  10.5     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: October 30, 2000

                                       10



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