FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period from __________ to __________
Commission file number 33-75594
MERIDIAN FINANCIAL CORPORATION
(Name of small business issuer in its charter)
Indiana 35-1894846
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
9265 Counselor's Row, Suite 106
Indianapolis, Indiana 46240-6402
(Address of principal executive offices)
(317) 814-2000
(Issuer's telephone number)
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 twelve 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 [ ]
Number of common shares, without par value, outstanding at August 12, 1997:
1,000
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
MERIDIAN FINANCIAL CORPORATION
FORM 10-QSB
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Balance Sheets at June 30, 1997 and
September 30, 1996 3
Condensed Statements of Earnings (Loss) for the three months
and the nine months ended June 30,1997 and 1996 4
Condensed Statements of Cash Flows for the nine months
ended June 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Index to Exhibits 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
MERIDIAN FINANCIAL CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<S> <C> <C>
June 30, September 30,
1997 1996
ASSETS
Finance receivables, net:
Net investment in direct financing leases $ 8,182,687 $ 5,425,285
Loans receivable - 781,940
Total finance receivables 8,182,687 6,207,225
Cash 977,938 115,744
Cash held in origination account 3,658 4,252
Debt service reserve funds 112,467 156,789
Debt issue costs, net 439,256 610,321
Other assets 569,772 268,483
Total assets $10,285,778 $ 7,362,814
LIABILITIES AND
SHAREHOLDERS' EQUITY
Bonds payable $ 5,623,352 $ 6,382,117
Warehouse line of credit 2,025,000 -
Subordinated debt 512,500 -
Accounts payable and accrued expenses 199,921 59,900
Total liabilities 8,360,773 6,442,017
SHAREHOLDERS' EQUITY:
Preferred stock 3,203,060 1,789,560
Common stock 68,533 68,533
Additional paid-in capital - 37,500
Accumulated deficit (1,346,588) (974,796)
Total shareholders' equity 1,925,005 920,797
Total liabilities and shareholders' equity $10,285,778 $ 7,362,814
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
MERIDIAN FINANCIAL CORPORATION
CONDENSED STATEMENTS OF EARNINGS (LOSS)
(Unaudited)
<TABLE>
Three months ended Nine months ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUE:
Interest income from leases and
mortgage loan $ 279,085 $256,978 $ 852,216 $ 766,105
Gains from brokerage activities - 132,613 5,194 132,613
Gains on early termination of leases 1,567 - 50,709 43,344
Investment income and other 21,821 29,341 34,150 87,669
Total revenue 302,473 418,932 942,269 1,029,731
EXPENSES:
Interest expense 236,878 227,697 692,915 678,824
Provision for credit losses 22,079 - 22,079 -
Legal and professional 15,162 12,000 44,252 41,050
Other general and administrative 193,786 103,976 465,815 322,141
Total expenses 467,905 343,673 1,225,061 1,042,015
NET EARNINGS (LOSS) (165,432) 75,259 (282,792 (12,284)
Less - Preferred stock dividends (10,000) (40,000) (89,000) (120,000)
EARNINGS (LOSS) TO COMMON
SHAREHOLDERS $(175,432) $ 35,259 $(371,792) $(132,284)
EARNINGS (LOSS) PER COMMON
SHARE $ (175.43) $ 26.44 $ (371.79) $(132.28)
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
MERIDIAN FINANCIAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Nine Months Ended
June 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (282,792) $ (12,284)
Adjustments to reconcile net earnings (loss)
to net cash from operating activities-
Depreciation and amortization 243,643 243,997
Capitalization of subordinated debt interest 12,500 -
Provision for credit losses 22,079 -
Increase in other assets (26,814) (106,767)
Increase (decrease) in accounts payable
and accrued expenses 40,939 (72,343)
Net cash provided by (used in) operating activities 9,555 52,603
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to direct financing leases (4,129,539) (2,583,600)
Principal payments received on direct financing leases
and loans receivable 2,089,077 2,081,936
Other - (33,493)
Net cash provided by (used in)investing activities(2,040,462) (535,157)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Series C Preferred Stock, net 2,876,000 -
Proceeds from issuance of Subordinated Debt 500,000 -
Redemption of Series B Preferred Stock (1,500,000) -
Proceeds from issuance of bonds payable - 1,375,000
Principal payments on bonds payable (758,765) (631,063)
Proceeds from bank borrowings 3,127,884 -
Principal payments on bank borrowings (1,102,884) -
(Increase) decrease in cash held in debt service
reserves and origination accounts 44,916 (74,713)
Financing costs paid (205,050) (129,375)
Preferred stock dividends (89,000) (120,000)
Other - (68,383)
Net cash provided by financing activities 2,893,101 351,466
NET CHANGE IN CASH 862,194 (131,088)
CASH, at beginning of period 115,744 311,701
CASH, at end of period $ 977,938 $ 180,613
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
5
MERIDIAN FINANCIAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
1. General:
The financial information included herein was prepared in conformity with
generally accepted accounting principles, and such principles were applied
on a basis consistent with those reflected in the Annual Report on Form 10-KSB
for the year ended September 30, 1996.
The information furnished includes all adjustments and accruals which are,
in the opinion of management, necessary for a fair presentation of results
for the interim periods. Results for any interim period may not be
indicative of the results for the entire year.
The disclosures in the notes presume that the users of the interim
financial information have read or have access to the audited financial
statements included in the Annual Report on Form 10-KSB for the year ended
September 30, 1996.
2. Accounting Policy - Allowance for Credit Losses
The allowance for credit losses is increased by charges to income and decreased
by chargeoffs, net of recoveries. Management's periodic evaluation of the
adequacy of the allowance is based on the Company's past loss experience, known
and inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of the underlying collateral,
and curret economic conditions. Leases are charged off when deemed
uncollectible.
3. Finance Receivables:
The components of the Company's net investment in direct financing leases
are as follows:
June 30, September 30,
1997 1996
Minimum lease payments to be received $ 10,759,071 $ 7,524,065
Less - Unearned income (2,554,305) (2,098,780)
Less - Allowance for credit losses (22,079) -
Net investment in direct
financing leases $ 8,182,687 $ 5,425,285
The Company had a lease and mortgage loan outstanding to Old Indiana
Limited Liability Company, in the total amount of approximately $1.1
million as of December 31, 1996, and both the lease and mortgage loan were
in default as of that date. During the quarter ended March 31, 1997,
the Company received funds to pay off both the lease and mortgage
loan. The Company no longer has any amounts outstanding with Old Indiana
Limited Liability Company.
The Company has additional leases with a net investment balance of
approximately $1.2 million which were not performing in accordance
with their contractual terms at June 30, 1997. Management of the Company
has reviewed its collateral position on these transactions and has
consulted with legal counsel. Based on this review and
consultation, management believes that the Company is adequately secured
and will recover all amounts presently owed. Management of the Company
continues to actively pursue the resolution of these finance receivables,
and expects that all of the nonperforming leases will either be repaid or
brought current in accordance with their contractual provisions.
6
<PAGE>
MERIDIAN FINANCIAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
4. Bonds Payable:
At June 30, 1997, bonds payable consist of two series of bonds, bearing
interest at rates of either 9% or 10% ($2,572,772 at 9% and $3,050,580 at
10%) collateralized by equipment purchased and leases originated from
proceeds of the offerings, cash held in the origination account, and by
debt service reserve funds held by a trustee. The two series are not
cross-collateralized, but are cross-defaulted. Quarterly principal
payments are required from the principal portions of the
related lease payments received by the Company. Based on the leases in
place as of June 30, 1997, quarterly principal payments for the next twelve
months are expected to total approximately $1,242,000.
5. Preferred Stock and Subordinated Debt Infusion:
On March 28, 1997, the Company entered into a Securities Purchase Agreement
(the "Purchase Agreement") with Inroads Capital Partners, L.P.
("Inroads"), Mesirow Capital Partners VII, an Illinois Limited Partnership
("Mesirow"), Edgewater Private Equity Fund II, L.P. (the latter three
parties being the "Purchasers"), Michael F. McCoy ("Mr. McCoy") and William
L. Wildman ("Mr. Wildman") pursuant to which the Purchasers have purchased
from the Company a total of 3,000 shares of the Company's Series C
Convertible Preferred Stock (the "Preferred Shares") and
$500,000 aggregate principal amount of 10% Subordinated Notes due March 31,
2002 (the "Notes"). The aggregate purchase price for the Preferred
Shares was $3,000,000 and the aggregate purchase price for the Notes was
$500,000. Subject to certain conditions, the Purchasers are obligated
under the Purchase Agreement to purchase an additional $3,000,000
aggregate principal amount of Notes.
The Subordinated Debt is subject to a Subordination and Intercreditor
Agreement between the Company, the Purchasers and LaSalle National Bank,
the Company's lender as described in footnote 6. The Subordinated Debt is
subordinate to the LaSalle Bank Credit Facility.
The Preferred Shares are convertible into Common Shares of the Company at any
time. The conversion ratio initially is one-for-one, but is subject to
adjustment under certain circumstances. In general, the Preferred Shares have
full voting rights (voting together with the Common Shares)
on all actions submitted to a vote of the Company's shareholders. Each
Preferred Share initially entitles the holder thereof to one vote on each
matter
7
<PAGE>
MERIDIAN FINANCIAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
submitted, but the number of votes is subject to adjustment on the same
basis as the conversion ratio. The convertible Preferred Shares are
considered to be common stock equivalents for purposes of the earnings per
share calculation, however they are presently excluded from the
calculation of loss per share because their effects are antidilutive.
The Company's outstanding capital stock consists of 1,000 Common Shares
(with full voting rights), 525 of which are owned by Mr. McCoy, 1,000
shares of Series A Preferred Stock (without voting rights), and the
Preferred Shares. $1,500,000 of the proceeds of the sale of the Preferred
Shares was used to redeem all of the Company's outstanding Series B
Preferred Stock and warrants to purchase Common Shares (which were owned by
the holders of the Series B Preferred Stock). The holders of the Series B
Preferred Stock had limited voting rights, including the right to elect one
director.
As a result of the issuance of the Preferred Shares and the redemption of
the Series B Preferred Stock, the Purchasers collectively are entitled
to exercise 75% of the voting power of the Company under ordinary
circumstances. Prior to the issuance of the Preferred Shares, Mr.
McCoy was entitled to exercise a majority of the voting power of the
Company under ordinary circumstances.
In connection with the issuance of the Preferred Shares, the Company also
entered into a Voting Agreement with the Purchasers, Mr. McCoy and Mr.
Wildman under which the parties agreed to cooperate to cause the Company's
Board of Directors to consist of five members, one of whom
would be designated by Inroads, one of whom would be designated by Mesirow,
one of whom would be designated by the holders of two-thirds of the voting
power of the Company exercisable by the Purchasers, and two of whom would
be designated by Mr. McCoy. The rights of the parties
to designate directors terminate under certain circumstances.
The Company and the Purchasers also entered into a Registration Rights
Agreement entitling the Purchasers, under certain circumstances, to demand
or otherwise participate in a public offering of the Company's equity
securities.
The Company, the Purchasers and Mr. McCoy also entered into an Executive
Share Agreement pursuant to which the Purchasers are obligated,
subject to certain conditions, to transfer, for no
consideration other than the fulfillment of such conditions, to Mr. McCoy
and/or such other officers, directors employees or consultants of the
Company as he designates, up to 8% of the Preferred Shares purchased by
each Purchaser.
8
<PAGE>
6. Bank Credit Facility:
On April 18, 1997, the Company finalized a Credit Agreement (the
"Agreement") with LaSalle National Bank. The Agreement consists of a
$5 million warehouse line, which will convert to a
term loan six months after the effective date. This facility replaces the
Company's previous $1 million facility. The interest rate on the warehouse
line is either prime plus 1%, or LIBOR plus
300 basis points, at the option of the Company. Upon conversion to a term
loan, the interest rate will be either (1) prime plus 1.25%, (2) LIBOR plus
325 basis points, or (3) the treasury rate for similar maturities plus
325 basis points, each at the option of the Company. The term loan
will be for a three year period.
The warehouse line requires monthly payments of interest only. The term
loan requires monthly payments of principal and interest, with the principal
portion equaling the principal amounts scheduled to be received on the
underlying leases.
The credit facility is secured by a perfected first security interest in
all existing assets with the exception of the existing leases financed by
the Series I and II bond issues. Each new draw will be secured by an
assignment of the lease contract and a perfected first security interest in
the underlying equipment.
The Agreement requires the Company to maintain a defined level of tangible
net worth, allows a maximum ratio of recourse debt to tangible net worth
of 5.00:1, defines minimum interest coverage ratios, and limits dividends to
those required on the Series A Preferred Stock.
Subject to the Purchasers acquiring the additional $3 million in
subordinated notes as described in footnote 5, and certain other
conditions, LaSalle National Bank has committed to raise the credit
facility to a total of $10 million.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview:
The Company's cash in-flows consist primarily of lease payments from
lessees, borrowings under credit facilities and the proceeds of financing
transactions, as discussed below. The Company's cash out-flows consist
primarily of investments in leases, debt service obligations, dividend
payments on the Company's preferred stock, and general and administrative
expenses. The profitability of the Company depends largely on the
Company's ability to enter into suitable leases, to realize an adequate
spread between the interest rate paid by the Company on its borrowings and
the implicit interest rate charged on the leases, and to avoid defaults by
the lessees.
Liquidity and Capital Resources:
With the expiration of the Company's public offering of bonds on December
31, 1995, the Company began to explore various other sources of
funding, with the intention to ultimately reduce the Company's borrowing
costs, and to provide the Company with an adequate source of funding to grow
the lease portfolio. On March 28, 1997, the Company entered into a
transaction with three venture capital funds which initially raised $3.5
million in capital, and which is expected, subject to certain conditions,
to result in a total of $6.5 million of new capital. This capital is in the
form of a new Series C Convertible Preferred Stock ($3 million) and
Subordinated Debt (currently $0.5 million; but expected to be increased to
$3.5 million). The Company utilized $1.5 million of the proceeds to redeem
its Series B Preferred Stock and related warrants.
In conjunction with the above transaction, on April 18, 1997, the Company
entered into a Credit Agreement (the "Agreement") with LaSalle National
Bank for a total of $5 million, which will be raised to $10 million when the
additional $3 million of subordinated debt is infused, and subject to
compliance with existing covenants. The Agreement consists of a $5 million
warehouse line, which will convert to a term loan six months after the
effective date. This credit facility replaces the Company's $1 million
warehouse line with a different bank. The Company is in discussions with
other banks and financial enterprises interested in participating in the
LaSalle credit facility, with the goal being a $25 million facility.
With the closing of the capital financing transaction and senior credit
facility, the Company has access to significant amounts of capital which
previously had not been available. The Company expects to be able to grow
the Company's portfolio at a much faster rate than in the past, while
maintaining a debt-to-equity ratio that is below industry average.
Management believes that its overall sources of liquidity will continue to
be sufficient to satisfy the foreseeable financial obligations of the
Company. Management of the Company knows of no material requirements for
capital expenditures other than to enter into leases.
Analysis of Cash Flows:
Net cash flows from operating activities result primarily from net earnings
or losses, adjusted for non-cash items such as depreciation and
amortization of assets and from changes in working capital. The Company
experienced net cash inflows from operations of $9,555 for the nine
months ended June 30, 1997, compared to a net cash inflow of $52,603 for
the nine months ended June 30, 1996. The decrease in cash flows from
operations from period to period is due primarily to a decrease in gains in
brokerage activity of $5,194 in the 1997 period compared with $132,613 in
the 1996 period.
10
<PAGE>
Net cash flows used in investing activities consist primarily of
investments in leases, which is the Company's primary requirement for cash,
and principal payments received from lessees, which is one of the Company's
principal sources of cash. During the nine months ended June 30, 1997, the
Company invested $4,129,539 in twenty-nine leases, compared to
$2,583,600 in eighteen leases for the same period in 1996. Principal
payments received on leases and loans receivable totaled $2,089,077 for the
nine months ended June 30, 1997 compared to $2,081,936 for the same
period in 1996. Principal payments received in the 1997 period
include approximately $145,000 from brokerage activity and approximately
$1,132,000 from early terminations and the prepayment of the mortgage
loan receivable. The 1996 period includes approximately $816,000 from
brokerage activity and $754,000 from the early terminations of leases.
Investments in leases and principal payments received on leases are expected
to grow in future periods.
Cash inflows from financing activities have consisted of bank borrowings
and proceeds from the sale of equity and debt securities. Cash outflows
consist of costs incurred in the sale of the securities, principal payments
on borrowings and debt securities, preferred stock dividends, and amounts
deposited in the debt service reserve and origination accounts. As
previously described, on March 28, 1997, the Company raised $3,500,000 in
the form of $3,000,000 of Series C Preferred Stock and $500,000 of
subordinated debt. In conjunction with the preferred stock and subordinated
debt infusion, the Company utilized $1,500,000 of the proceeds to redeem all
of the Company's outstanding Series B Preferred Stock and warrants to
purchased Common Shares (which were owned by the holders of the Series B
Preferred Stock). As a result of the redemption of the Series B
Preferred Stock, future preferred stock dividends requirements will be
reduced to $10,000 per quarter. Also during the nine months ended June 30,
1997, the Company had borrowings and repayments totaling $1,102,884 on
its previous $1 million warehouse line. On April 18, 1997, the Company
entered into a $5 million credit facility with LaSalle National Bank,
and through June 30, 1997 has borrowed $2,025,000 on this line. In the
1996 period, the Company sold $1,375,000 of bonds prior to the expiration of
the offering on December 31, 1995. Management anticipates that the
Company's primary cash inflows from financing activities in the
future will be from the new senior credit facility, and that the amount of
borrowings will continue to grow as the Company's growth in leasing
transactions continues.
Results of Operations:
For the nine months ended June 30, 1997, the Company reflected an operating
loss, before preferred dividend requirements, of $282,792 compared to a
loss for the same period in 1996 of $12,284. Gains from brokerage activities
were $5,194 in the 1997 period compared to $132,613 in the 1996 period.
Brokerage gains will fluctuate from period to period, however the Company
expects these gains to increase in the future. Preferred dividend
requirements totaled $89,000 and $120,000 in the 1997 and 1996 period,
respectively. Dividends were reduced in the 1997 period due
to the redemption of the Series B Preferred Stock. The
Series C Preferred Stock requires no dividend payments.
Interest income from leases, loans receivable and invested funds for the
nine months ended June 30, 1997 was $886,366 and interest expense was
$692,915 in the same period, or a net interest spread of $193,451, compared
to $853,774 of interest income, $678,824 of interest expense, and a net
interest spread of $174,950 in the comparable period in 1996. In future
periods, management expects the interest spread to increase as the Company
continues to invest in new leases and initiates the new senior credit
facility and realizes the effects of the Series C Preferred Stock and
Subordinated Debt infusions, both of which should lower the Company's
overall cost of funds.
11
<PAGE>
Other general and administrative expenses increased approximately $166,000
during the nine months ended June 30, 1997 compared to the same
period in 1996. Approximately $60,000 of this increase reflects the
increased travel and marketing efforts to generate new business, in
anticipation of the capital infusion and senior credit facility as
described in Liquidity and Capital Resources. Payroll related costs and
consulting fees for the 1997 period have also increased approximately $54,000
compared to the 1996 period. In addition, effective April 1,1997, the
Company has begun accruing a general reserve for losses on finance
receivables, which total approximately $22,000 as of June 30, 1997. The
decision to begain accruing a provision for credit losses is not related to
changes in the condition of the portfolio, but rather, it is related to the
portfolio growth that is taking place as a result of the capital transactions
previously discussed.
The Company anticipates a significant increase in the amount of lease
transactions in the future. However, with its management team and
systems in place, general and administrative costs going forward should be
relatively fixed, with the exception of a limited number of personnel additions
required by anticipated growth in the Company's lease portfolio.
Therefore, interest earned on leases is expected to grow at a much faster
pace than the general and administrative expenses.
Impact of Interest Rate Changes and the Restaurant Industry:
The overall strength of the U.S. economy and the general interest rate
environment have remained relatively stable during the past few years. To
date the Company has funded its fixed rate leases with fixed rate debt, with
similar duration, thereby avoiding any interest rate risk. While a
dramatic rise in future interest rates would not have a direct impact on
leases booked to date, it may have an impact on the restaurant industry's
growth rate. A rising interest rate environment may also impact the
Company's future gains on brokerage activities. The new credit facility
with LaSalle National Bank allows for various interest rate options,
including fixed rates, and the Company expects to utilize interest rate caps
when necessary to limit its exposure to interest rate risk.
The Company's primary focus involves the leasing of complete packages of
restaurant equipment for restaurant franchises. The franchise restaurant
industry has experienced rapid growth as the number of franchise concepts
and units continues to grow. As large metropolitan areas in some
geographic areas begin to reach saturation points from the standpoint of
restaurant locations, the Company is seeing an increasing number of leasing
opportunities in more rural locations, which would tend to be the smaller
type franchisee that the Company targets. In addition, the Company is seeing
some consolidation in the marketplace as franchisees purchase other
franchisees' operations. While these types of transactions are generally
larger in size than the Company's typical lease deal, the Company expects
this consolidation to present opportunities to utilize the Company's third
party brokerage source.
Inflation has not had a material effect on the Company's operations.
Credit Risk:
During the quarter ended December 31, 1996, the Company declared a lease
and mortgage loan with Old Indiana Limited Liability Company, in the
total amount of approximately $1.1 million, to be in default. During the
quarter ended March 31, 1997, the Company held an auction for the equipment
portion of the collateral. The proceeds from this auction repaid the amounts
owed on the lease and reduced the amount owed on the mortgage loan. The
Company's position in the mortgage loan was then purchased by a third party
and as a result, the Company no longer has any amounts outstanding with
Old Indiana Limited Liability Company.
12
<PAGE>
The Company has additional leases with a net investment balance of
approximately $1.2 million which are not performing in accordance with their
contractual terms at June 30, 1997. Management of the Company has reviewed
its collateral position on these transactions and has consulted with legal
counsel. Based on this review and consultation, management believes
that the Company is adequately secured and will recover all amounts presently
owed.
Management of the Company is actively pursuing the resolution of these
finance receivables, and expects that all of the non-performing leases will
either be repaid or brought current in accordance with their contractual
provisions.
Forward-looking Statements:
The statements contained in this filing on Form 10-QSB that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Actual results may differ
materially from those included in the forward-looking statements. These
forward-looking statements involve risks and uncertainties including, but
not limited to, the following: changes in general economic conditions,
including changes in interest rates and spending on food prepared
outside the home; competitive or regulatory changes that affect the
cost of or demand for the Company's lease product; and the availability of
funds or third-party financing sources to allow the Company to purchase
equipment and enter into new leases. The Company's future results also could be
adversely affected if it is unable to resolve the current non-performing
leases in its portfolio without significant loss.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed on the Index to Exhibits
appearing on page 15 are filed herewith.
(b) On April 14, 1997, the Company filed a Current
Report on Form 8-K dated March 28, 1997, describing the
Series C Preferred Stock and Subordinated debt
transaction, and its impact on the voting power of the
Company.
13
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
MERIDIAN FINANCIAL CORPORATION
By: /s/ Michael F. McCoy
Michael F. McCoy
President
By: /s/ Gerald W. Gerichs
Gerald W. Gerichs
Vice President, Secretary
and Treasurer
(Principal Financial Officer)
Date: August 13, 1997
14
<PAGE>
INDEX TO EXHIBITS
Page No.
Exhibit In this
No. Description Filing
10-U (1) Credit Agreement dated April 18, 1997 with LaSalle National
Bank
10-V (1) Security Agreement and Master Assignment of Leases dated
April 18, 1997 with LaSalle National Bank
10-W (1) Subordination and Intercreditor Agreement between the
Company, the Purchasers and LaSalle National Bank
10-X (1) Initial Credit Line Note in connection with the LaSalle
National Bank Credit Agreement
11 (2) Computation of Per Share Earnings <Loss>
27 (2) Financial Data Schedule
(1) The copy of this exhibit is incorporated by reference to the
exhibit with the same number filed as part of the Registrant's
Quarterly Report on Form 10-QSB for the quarterly period March 31, 1997.
(2) Filed with this report on Form 10-QSB.
15
COMPUTATION OF PER SHARE EARNINGS (LOSS)
Earnings (loss) per common share is calculated by
subtracting preferred stock dividends from net earnings
(loss) and dividing that amount by the weighted average
shares outstanding for the period. Weighted average shares
outstanding for the three month period ending June 30, 1996
is 1,333 and 1,000 for all other periods presented. The
weighted average shares outstanding in all periods except
the three month period ending June 30, 1996 exclude 333
shares relating to warrants outstanding, which entitled the
holders to purchase, at a nominal exercise price, a number
of common shares equal in the aggregate to 25% of the total
number of common shares that would be outstanding
immediately after issuance of all such common shares, since
these warrants are antidilutive. These warrants were
redeemed as part of the March 28, 1997 financing transaction
as described in Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and
Capital Resources.
Exhibit 11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000917214
<NAME> MERIDIAN FINANCIAL CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,094,063
<SECURITIES> 0
<RECEIVABLES> 8,182,687
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,285,778
<CURRENT-LIABILITIES> 0
<BONDS> 5,623,352
0
3,203,060
<COMMON> (1,278,055)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,285,778
<SALES> 0
<TOTAL-REVENUES> 972,269
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 510,067
<LOSS-PROVISION> 22,079
<INTEREST-EXPENSE> 692,915
<INCOME-PRETAX> (282,792)
<INCOME-TAX> 0
<INCOME-CONTINUING> (282,792)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (371,792)
<EPS-PRIMARY> (371.79)
<EPS-DILUTED> (371.79)
</TABLE>
