SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities and Exchange Act of 1934
For the Quarter Ended Commission File Number
November 30, 1996 0-12423
MERIT DIVERSIFIED INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 94-2906927
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25320 Bellanca Way, Torrance, CA 90505
(Address of principal executive offices)
Registrants telephone number, including area code: (310) 326-3871
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of each of the registrants classes of common
stock, as of November 30, 1996 was 16,209,316 shares, all of one class of
$.00 par value Common Stock.
MERIT DIVERSIFIED INTERNATIONAL, INC.
FORM 10-Q
Quarter Ended November 30, 1996
TABLE OF CONTENTS
FINANCIAL INFORMATION PAGE
Item 1- Consolidated Financial Statements
Consolidated Balance Sheets as of November 30, 1996 and
August 31, 1995 3
Consolidated Statements of Operations for the three months
ended November 30, 1996 and November 30, 1995 4
Consolidated Statements of Cash Flows for the three months
ended November 30, 1996 and November 30, 1995 5
Notes to Consolidated Financial Statements 6,7
Item 2- Managements Discussion and Analysis of Financial
Condition and Results of Operations 8,9
OTHER INFORMATION
Item 1- Legal Proceedings 10
Item 2- Changes in Securities 10
Item 3- Defaults upon Senior Securities 10
Item 4- Submission of Matters to a Vote of Security Holders 10
Item 5- Other Information 10
Item 6- Exhibits and Reports on Form 8-K 10
SIGNATURES 11
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental Stage Company)
PART 1: FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
AS OF NOVEMBER 30, 1996 AND AUGUST 31, 1996
November 30, August 31,
1996 1996
(Unaudited) (Note 1)
Assets $ - $ -
Total Assets $ - $ -
Liabilities and Shareholders Equity
Current liabilities
Accounts and taxes payable $ 8,000 $ 8,000
Total current liabilities 8,000 8,000
Commitments
Shareholders Equity
Common Stock-no par value;
50,000,000 shares authorized,
16,209,316 issued and outstanding
as of November 30, 1996 and
August 31, 1996 1,332,349 1,332,349
Additional paid-in capital 1,122,215 1,122,215
Accumulated deficit-accumulated
during the developmental stage (2,462,564) (2,462,564)
Total shareholders equity $ (8,000) $ (8,000)
Total liabilities and
shareholders equity $ - $ -
See Notes to Consolidated Financial Statements
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<S>
<S>
Three Months Three Months Since Being
Ended Ended A
November 30, November 30, Developmental
1996 1995 Stage Company
(Note 1)
Net revenue $ - $ - $ -
Costs and expenses:
General and administrative - - 2,244,147
Depreciation and amortization - - 6,200
Income (loss)from operations $ - - $ (2,250,347)
Other income (expense):
Interest expense - - (22,518)
Loss on sale of fixed assets - - (918)
Loss on sale of investments - - (269,800)
Income from debt adjustment - - 86,419
Total other income (expense) - - (206,817)
Income before taxes
on income - - (2,457,164)
Taxes on income - - 5,400
Net income (loss) - - (2,462,564)
Net income (loss) per share nil nil
Weighted average number of shares
and share equivalents
outstanding 16,209,316 19,717,435
</TABLE>
See Notes to Consolidated Financial Statements
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED NOVEMBER 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<S>
<S>
Increase (Decrease) in Cash and Cash Equivalents
Three Months Three Months Since Being
Ended Ended A
November 30, November 30, Developmental
1996 1995 Stage Company
Operating activities:
Net income (loss) $ - $ - $ (2,462,564)
Adjustments to reconcile net loss
to cash used in operating activities:
Amortization expense - - 6,200
Changes in operating assets and
liabilities:
Accounts payable - - 8,000
Cash provided by (used in)
operating activities - - (2,448,364)
Investing activities: - - -
Financing activities:
Loan proceeds - - 66,364
Issuance of capital stock - - 2,382,000
Cash provided by financing
activities - - 2,448,364
Net increase (decrease) in
cash and cash equivalents - - -
Cash and cash equivalents,
beginning of period - - -
Cash and cash equivalents,
end of period $ - $ - $ -
</TABLE>
See Notes to Consolidated Financial Statements
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
Note 1 - Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments considered necessary for a fair presentation have been
included. Operating results for the three months ended November 30, 1994 are
not necessarily indicative of the results that may be expected for the year
ended August 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Companys Form
10-K for the year ended August 31, 1994.
Note 2 - Net Income (Loss) Per Share
Net income (loss) per share and common equivalent share is computed using the
weighted average number of shares outstanding during each period.
During April, 1996, the Board of Directors declared a reverse stock split,
reducing the number of common shares outstanding through the distribution of
one common share in exchange for twenty (20) common shares held by shareholders
of record as of April 30, 1996. All references to common share and per share
amounts in the accompanying financial statements have been retroactively
adjusted to reflect the effect of this transaction.
Note 3- Related Party Transactions
The Company has been able to continue in existence and reduce its debts and
obligations through the assistance of certain major shareholders who continue
to fund the Companys general and administrative expenses and to pay outstanding
obligations. There can be no assurance that these shareholders will continue
such funding in the future.
Note 4- Going Concern
The Company has incurred significant losses since its inception and as of
November 30, 1996, has no source of revenue. The Company has no cash and has
maintained its existence and paid ongoing expenses through the issuance of
common stock.
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOVEMBER 30, 1996
The Company has been able to continue because major shareholders have continued
to invest in the Company to meet its expenses. As of November 30, 1996, the
Company has been successful in converting most of its debt to equity.
The Company is considered a development stage Company and will remain in this
status until operations begin. There can be no assurance that the Company will
be able to merge with an operating company, acquire an ongoing business, or
that the major shareholders will continue to pay the expenses of the Company.
(Balance of Page Left Blank Intentionally)
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental Stage Company)
NOVEMBER 30, 1996
Item 2 - Managements Discussion and Analysis of Financial Condition and
Results of Operations or Plan of Operation
The following review concerns the three month period ended November 30, 1996
and November 30, 1995, which should be read in conjunction with the financial
statements and notes thereto presented in the Form 10-Q.
The information set forth in Managements Discussion and Analysis of Financial
Condition and Results of Operations below includes forward looking statements
within the meaning of Section 27A of the Securities Act, and is subject to the
safe harbor created by that section. Factors that could cause actual results to
differ materially from these contained in the forward looking statements are
set forth in Managements Discussion and Analysis of Financial Condition and
Results of Operations.
Plan of operation.
The Company has continued its efforts to acquire, merge with or enter into
another form of business combination with another entity, and the Company plans
to continue these efforts in the current fiscal year. It is presently unknown
whether any transaction will be concluded. The Company considers it current
cash and cash equivalent balances inadequate to satisfy its cash requirements
for the next twelve months. Legal and accounting and other expenses required
could increase significantly in connection with any contemplated business
combination. The Company may not have the liquidity and capital resources to
consummate such business combination. Due to the nature of the Companys
present activities, however the Company is unable to predict its likely
expenditure for professional fees and other expenses. The Company has no
major capital commitments nor access to mechanisms to fund working or
operating capital, and there can be no assurance that it will be successful
in its efforts to raise additional capital to maintain its plan of operation.
Results of Operations Three Months Ended November 30, 1996 and November 30,
1995
The Company has no assets and has not engaged in any operational activities
during the past three years. At present, the Company has no employees. The
Company does not expect any changes unless the Company concludes a merger or
other business combination.
During the three months ended November 30, 1996, the Company had no
operations. The Company maintained its existence through contributions from
its shareholders to satisfy its general and administrative expenses. As
detailed on the accompanying consolidated statements of cash flows, there
were no significant adjustments between the net loss and net change in cash.
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental Stage Company)
NOVEMBER 30, 1996
Item 2 - Managements Discussion and Analysis of Financial Condition and
Results of Operations or Plan of Operation (Continued)
As stated above in the Plan of Operation, due to the nature of the Companys
activities, the Companys prospects for the future are dependent on a number of
variables which cannot be predicted. Generally, after identifying a potential
business opportunity, the Company could incur significant costs in evaluating
the desirability of an acquisition or other form of business combination.
Should the Company determine to proceed with the business combination, the
transaction costs could be significant. Thereafter, results of operation
would likely be materially affected by the business acquired or merge with
the Company.
(Balance of Page Left Blank Intentionally)
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental Stage Company)
NOVEMBER 30, 1996
Item 1 Legal Proceedings
None
Item 2 Change in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
None
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental Stage Company)
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MERIT DIVERSIFIED INTERNATIONAL, INC.
(Registrant)
Date: January 23, 1997 By: __________________/s/__________________
Michael Neri, Chief Accountant
