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, 1998
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 of (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 14, 1998:
1,081.63
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, 1998 and
September 30, 1997 3
Condensed Statements of Operations for the three months and the
nine months ended June 30, 1998 and 1997 4
Condensed Statements of Cash Flows for the nine months
ended June 30, 1998 and 1997 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
MERIDIAN FINANCIAL CORPORATION
CONDENSED BALANCE SHEETS
<TABLE>
(UNAUDITED)
JUNE 30, SEPTEMBER 30,
1998 1997
ASSETS
<S> <C> <C>
Finance receivables, net:
Net investment in direct financing leases $ 15,400,109 $ 9,552,098
Loan held for sale 1,775,000 1,317,707
Total finance receivables 17,175,109 10,869,805
Cash 470,548 627,098
Cash held in origination account - 3,658
Debt service reserve funds 98,272 112,467
Debt issue costs, net 535,748 694,381
Other assets 459,112 392,627
Total assets $ 18,738,789 $ 12,700,036
LIABILITIES AND
SHAREHOLDERS' EQUITY
Bonds payable $ 4,888,336 $ 5,472,283
Bank borrowings-warehouse line 4,060,000 1,629,000
Bank borrowings-term loan 4,233,600 -
Subordinated debt 3,709,863 3,536,164
Accounts payable and accrued expenses 192,844 290,776
Total liabilities 17,084,643 10,928,223
SHAREHOLDERS' EQUITY:
Preferred stock 3,203,060 3,203,060
Common stock 241,866 68,533
Note receivable, common stock (178,967) -
Accumulated deficit (1,611,813) (1,499,780)
Total shareholders' equity 1,654,146 1,771,813
Total liabilities and shareholders' equity $ 18,738,789 $ 12,700,036
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE>
MERIDIAN FINANCIAL CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED PREVIOUS
JUNE 30, JUNE 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest and fee income $ 634,706 $ 300,906 $ 1,700,991 $ 886,366
Interest expense 430,163 236,878 1,202,348 692,915
Net interest income 204,543 64,028 498,643 193,451
Provision for credit losses - 22,079 52,956 22,079
Net interest income
after provision
for credit losses 204,543 41,949 445,687 171,372
Other income:
Gains from
brokerage activities 18,061 - 44,341 5,194
Gains on early
termination of leases 11,909 1,567 11,909 50,709
Total other income 29,970 1,567 56,250 55,903
General and
administrative expenses:
Salaries and
employee benefits 143,808 130,751 423,993 307,906
Other 73,237 78,197 159,977 202,161
217,045 208,948 583,970 510,067
Net income (loss) 17,468 (165,432) (82,033) (282,792)
Preferred stock dividends 10,000 10,000 30,000 89,000
Income (loss)
to common shareholders 7,468 (175,432) (112,033) (371,792)
Per share data:
Income (loss)
per common share $ 6.90 $ (175.43) $ (105.86) $(371.79) $ (114.17)
Income (loss) per common share
assuming dilution $ 1.83 $ (175.43) $ (105.86) $(371.79)
Weighted average common shares
outstanding 1,081.63 1,000.00 1,058.30 1,000.00
Weighted average common
shares outstanding
assuming dilution 4,081.63 1,000.00 1,058.30 1,000.00
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE>
MERIDIAN FINANCIAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
(UNAUDITED)
NINE MONTHS ENDED
JUNE 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET EARNINGS (LOSS) $ (82,033) $ (282,792)
ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS)
TO NET CASH FROM OPERATING ACTIVITIES-
DEPRECIATION AND AMORTIZATION 303,198 243,643
CAPITALIZATION OF SUBORDINATED DEBT INTEREST 173,699 12,500
PROVISION FOR CREDIT LOSSES 52,956 22,079
ADDITIONS TO LOAN HELD FOR SALE (457,293) -
INCREASE IN OTHER ASSETS (61,595) (26,814)
INCREASE IN ACCOUNTS PAYABLE
AND ACCRUED EXPENSES 6,794 40,939
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (64,274) 9,555
CASH FLOWS FROM INVESTING ACTIVITIES:
ADDITIONS TO DIRECT FINANCING LEASES (9,087,405) (4,129,539)
PRINCIPAL PAYMENTS RECEIVED
ON DIRECT FINANCING LEASES
AND LOANS RECEIVABLE 3,141,486 2,089,077
OTHER (60,137) -
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (6,006,056) (2,040,462)
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM ISSUANCE OF SERIES C
PREFERRED STOCK - 2,876,000
PROCEEDS FROM ISSUANCE OF SUBORDINATED DEBT - 500,000
REDEMPTION OF SERIES B PREFERRED STOCK - (1,500,000)
PRINCIPAL PAYMENTS ON BONDS PAYABLE (583,947) (758,765)
PROCEEDS FROM BANK BORROWINGS 7,337,000 3,127,884
PRINCIPAL PAYMENTS ON BANK BORROWINGS (672,400) (1,102,884)
DECREASE IN CASH HELD IN DEBT SERVICE
RESERVES AND ORIGINATION ACCOUNTS 17,853 44,916
FINANCING COSTS PAID (154,726) (205,050)
PREFERRED STOCK DIVIDENDS (30,000) (89,000)
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,913,780 2,893,101
NET CHANGE IN CASH (156,550) 862,194
CASH, AT BEGINNING OF PERIOD 627,098 115,744
CASH, AT END OF PERIOD $ 470,548 $ 977,938
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED FINANCIAL
STATEMENTS.
5
<PAGE>
MERIDIAN FINANCIAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(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, 1997.
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, 1997.
2. ACCOUNTING POLICY-DERIVATIVES:
THE COMPANY HAS LIMITED INVOLVEMENT WITH DERIVATIVE FINANCIAL
INSTRUMENTS AND DOES NOT USE
THEM FOR TRADING PURPOSES. THE COMPANY ENTERED INTO AN INTEREST RATE
SWAP AGREEMENT AS
A MEANS OF MANAGING THE INTEREST RATE EXPOSURE OF ITS TERM BANK CREDIT
FACILITY. THE INTEREST
RATE SWAP IS ACCOUNTED FOR UNDER THE ACCRUAL METHOD. UNDER THIS
METHOD, THE DIFFERENTIAL TO
BE PAID OR RECEIVED ON THE INTEREST RATE SWAP AGREEMENT IS RECOGNIZED
OVER THE LIFE OF THE
AGREEMENT AS AN ADJUSTMENT TO INTEREST EXPENSE. CHANGES IN FAIR VALUE
OF INTEREST RATE
SWAPS ACCOUNTED FOR UNDER THE ACCRUAL METHOD ARE NOT REFLECTED IN THE
ACCOMPANYING
FINANCIAL STATEMENTS. REALIZED GAINS AND LOSSES ON TERMINATED INTEREST
RATE SWAPS WILL BE
DEFERRED AS AN ADJUSTMENT TO THE CARRYING AMOUNT OF THE DESIGNATED
INSTRUMENTS AND
AMORTIZED OVER THE REMAINING ORIGINAL LIFE OF THE AGREEMENTS. IF THE
DESIGNATED INSTRUMENTS
ARE DISPOSED OF, THE FAIR VALUE OF THE INTEREST RATE SWAP OR
UNAMORTIZED DEFERRED GAINS OR
LOSSES WILL BE INCLUDED IN THE DETERMINATION OF THE GAIN OR LOSS ON THE
DISPOSITION OF SUCH
INSTRUMENTS. TO QUALIFY FOR SUCH ACCOUNTING, THE INTEREST RATE SWAP IS
DESIGNATED TO THE
TERM BANK CREDIT FACILITY AND ALTERS ITS INTEREST RATE CHARACTERISTICS.
3. FINANCE RECEIVABLES:
THE COMPONENTS OF THE COMPANY'S NET INVESTMENT IN DIRECT FINANCING
LEASES ARE
AS FOLLOWS:
JUNE 30, SEPTEMBER 30,
1998 1997
<TABLE>
<S> <C> <C>
MINIMUM LEASE PAYMENTS TO BE RECEIVED $ 23,297,019 $ 12,995,061
LESS - UNEARNED INCOME (7,786,580) (3,385,589)
LESS - ALLOWANCE FOR CREDIT LOSSES (110,330) (57,374)
NET INVESTMENT IN DIRECT FINANCING LEASES $ 15,400,109 $ 9,552,098
</TABLE>
6
<PAGE>
MERIDIAN FINANCIAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
THE COMPANY HAD LEASES WITH A NET INVESTMENT BALANCE OF APPROXIMATELY $2.4
MILLION AT
JUNE 30, 1998, WHICH WERE NOT PERFORMING IN ACCORDANCE WITH THEIR CONTRACTUAL
TERMS.
BASED ON THE COMPANY'S COLLATERAL POSITION, MANAGEMENT EXPECTS NO LOSSES ON
THESE
BALANCES.
4. BONDS PAYABLE:
At June 30, 1998, bonds payable consisted of two series of bonds,
bearing interest
at rates of either 9% or 10% ($2,202,455 at 9% and $2,685,881 at 10%)
collateralized by
equipment purchased and leases originated from proceeds of the
offerings 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, 1998, quarterly
principal
payments for the next twelve months are expected to total approximately
$1,281,000.
5. Bank Credit Facility:
On November 18, 1997, the Company converted $4,906,000 from its initial
warehouse line
into its initial term loan, utilizing the LIBOR rate option. The term
loan requires monthly
payments of principal totaling $89,200 plus interest.
As a result of the above conversion, the Company also began borrowing
on its second
$5 million warehouse line. As of June 30, 1998, the Company had
borrowed
$4,060,000 on this credit line.
In conjunction with the conversion of the warehouse line into the
initial term loan, effective
November 21, 1997, the Company entered into an interest rate swap
agreement with
LaSalle National Bank to make fixed rate payments at 6.12% and to
receive floating rate
LIBOR-based payments (5.6523% at June 30, 1998) on an initial notional
amount of
$4,906,000 with monthly amortization of $89,200. The maturity date of
the swap
agreement is April 18, 2002. The interest rate swap agreement is
accounted for on a
settlement basis. The Company is exposed to credit loss in the event
of nonperformance
by LaSalle National Bank for the net interest rate differential when
floating rates exceed
the fixed maximum rate. However, the Company does not anticipate
nonperformance by
the counterparty.
7
<PAGE>
MERIDIAN FINANCIAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
6. EARNINGS PER SHARE:
Earnings (loss) per common share and earnings (loss) per common share
assuming
dilution are computed under a new accounting standard which was first
effective in the
quarter ended December 31, 1997. All prior amounts have been restated
to be comparable.
Earnings (loss) per common share is based on net income (loss) after
preferred dividends,
divided by the weighted average number of shares outstanding during the
period. Earnings
(loss) per common share assuming dilution shows the dilutive effect, if
any, of additional
common shares issuable under convertible securities.
The Company has outstanding 3,000 shares of Series C Convertible
Preferred Stock.
These shares of preferred stock are currently convertible into 3,000
shares of the Company's
common stock, but have been excluded from the computation of earnings
per common
share assuming dilution for all periods presented, except for the three
months ended
June 30, 1998, because they were antidilutive.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview:
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. The closing of
two financing transactions during the year ended September 30, 1997 allows the
Company access to significant amounts of capital which previously had not been
available. Accordingly, the Company has been able to grow its portfolio at a
much faster rate than in prior years, while maintaining a debt-to-equity ratio
that is below industry average.
Liquidity and Capital Resources:
During the fiscal year ended September 30, 1997, the Company entered into a $10
million Credit Agreement with LaSalle National Bank, which consists of two $5
million warehouse lines which convert to term loans. In November, 1997, the
Company converted its initial warehouse line, with a balance of $4,906,000,
into a term loan. The Company selected the LIBOR rate option, and entered into
a LIBOR interest rate swap agreement to effectively fix the interest rate
related to this term loan.
As of June 30, 1998, the Company had borrowed approximately $4.1 million on its
second $5 million warehouse line.
The Company intends to continue to expand its lease portfolio during fiscal
year 1998 at a growth rate greater than that experienced in fiscal year 1997.
In order to do so, the Company will need additional sources of financing during
1998. If no new or expanded credit facilities or other funding sources are
obtained, the Company's cash flow from its existing lease portfolio would
permit only limited growth; however, the Company believes it will be successful
in establishing one or more new or expanded funding sources.
During the nine months ended June 30, 1998, the Company sold three leases to
third parties on a non-recourse basis as part of its brokerage activity. Total
proceeds were $808,000, and the transactions resulted in gains of approximately
$44,000. The Company expects this type of brokerage activity to continue in
the future.
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 a net cash
outflow from operations of $64,274 for the nine months ended June 30, 1998,
compared to a net cash inflow of $9,555 for the nine months ended June 30,
1997. The primary component of cash outflow from operations was the continued
funding of a loan held for sale, which amounted to $457,293 during the 1998
nine month period. On August 14, 1998, the Company completed the sale of this
loan to a third party and received the entire $1,775,000 in proceeds. This
will significantly increase cash flows from operations for the year ended
September 30, 1998 as the proceeds will be a cash inflow from operations.
9
Excluding the outflow from the loan held for sale, the most significant
contributor to operating cash flow is the net earnings before non-cash charges
for depreciation and amortization, capitalization of interest on subordinated
debt and provisions for credit losses. Net earnings before these non-cash
charges were $447,820 in 1998 compared to a loss of $4,570 in 1997. This
increase in income before non-cash charges, totaling $452,390, acrose in
substantial part from the increase in net interest income for the period of
$305,192, and the continued capitalization of interest on the Company's
subordinated debt through March 31, 1998 as required in the agreement with
the subordinated debt holders.
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 currently the Company's principal
source of cash. During the nine months ended June 30, 1998, the Company
invested $9,087,405 in sixty leases, compared to $4,129,539 in twenty-nine
leases for the same period in 1997, which reflects the Company's accelerated
growth rate. Principal payments received on leases and loans receivable
totaled $3,141,486 for the nine months ended June 30, 1998 compared to
$2,089,077 for the same period in 1997. Principal payments received in the
1998 period include approximately $764,000 from brokerage activity and
$1,290,000 from early terminations of leases. Principal payments in the 1997
period include approximately $145,000 from brokerage activity and $1,132,000
from early terminations of leases and the prepayment of a mortgage loan
receivable. Investments in leases and principal payments received on leases
are expected to continue to grow in future periods.
Cash inflows from financing activities historically have consisted of bank
borrowings and proceeds from the sale of equity and debt securities. In the
nine month period ended June 30, 1998, the Company's only significant source of
cash inflows from financing activities was bank borrowings. Cash outflows
consist of costs incurred in the sale of the securities, principal payments on
borrowings and debt securities, and preferred stock dividends. During the nine
months ended June 30, 1998, the Company received proceeds from bank borrowings
of $7,337,000 from its credit lines, a substantial increase from the $3,127,884
during the 1997 period. The Company also paid $154,726 during the nine months
ended June 30, 1998 and $205,050 during the 1997 comparable period for costs
related to its previously completed financing transactions. Preferred
dividends for the nine months ended June 30, 1998 were $30,000, which is less
than the $89,000 paid in the 1997 period due to the redemption of the Company's
Series B Preferred Stock in March, 1997. During the nine months ended June 30,
1997, the Company received proceeds of $3.5 million representing preferred
stock and subordinated debt. Of these proceeds, $1.5 million was used to
retire the Series B Preferred Stock. Management anticipates that the Company's
primary cash inflows from financing activities in the future will be from bank
borrowings, 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, 1998, the Company reflected an operating
loss, before preferred dividend requirements, of $82,033 compared to a loss for
the same period in 1997 of $282,792. Gains from brokerage activities and early
terminations of leases were $56,250 in the 1998 period compared to $55,903 in
the 1997 period. Brokerage gains will fluctuate from period to period.
Interest and fee income for the nine months ended June 30, 1998 was $1,700,991
and interest expense was $1,202,348 in the same period, resulting in net
interest income, before a provision for credit losses, of $498,643, compared to
$886,366 of interest income, $692,915 of interest expense, and
10
net interest income of $193,451 in the comparable period in 1997. This
increase in net interest income, totaling $305,192, reflects the increased
leasing activity made possible by completion of certain financing
transactions in March and April of 1997. In future periods, management
expects net interest income to increase further as the Company continues to
invest in new leases, and continues to realize the benefits from its 1997
financing arrangements which have lowered the Company's overall cost of funds.
The Company has continued to add to its general reserve for losses on finance
receivables. During the nine months ended June 30, 1998, the Company added
approximately $53,000 to the reserve, resulting in a reserve balance of
approximately $110,000. Management continually assesses the adequacy of its
allowance for credit losses and adjusts its provision accordingly. There have
been no chargeoffs against this reserve to date.
General and administrative expenses increased approximately $74,000 during the
nine months ended June 30, 1998 compared to the same period in 1997, primarily
due to an increase in payroll related costs, as the number of employees has
increased from five to eight from the 1997 period to 1998 to handle the
increase in leasing activity.
The Company is already experiencing, and expects to continue to experience, a
significant increase in the amount of funded lease transactions. However, with
its management team 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, the interest spread on finance receivables is expected to grow at a
much faster pace than general and administrative expenses.
For the three months ended June 30, 1998, the Company reflected income before
preferred dividends of $17,468, compared with a loss of $165,432 in the
comparable period in 1997. Although the 1998 period includes $29,970 in gains
from brokerage activity and early terminations, the size of the portfolio has
increased to the point where it is expected to generate net interest income
that is adequate to cover general and administrative expenses.
Impact of Interest Rate Changes and the Restaurant Industry:
The Company markets and funds fixed rate leases, and attempts to fund these
leases with fixed rate instruments of similar duration, thus virtually
eliminating interest rate risk. This was accomplished in prior years
through the issuance of five-year fixed rate bonds. The Company's more recent
funding sources also allow the Company to manage exposure to interest rate
risk. The Subordinated Notes issued in 1997, bear interest at a fixed rate
of 10%. The Company uses interest rate swap agreements in conjunction with
its variable rate term loans in order to effecctively fix the rate of
interest on the term loans. The Company's warehouse lines carry a variable
rate of interest, but have a duration of only six months. 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.
11
In the last ten years, the franchise restaurant industry has experienced rapid
growth and the number of franchise units continues to grow. As some concepts
begin to reach a mature stage, and it becomes increasingly more difficult to
sustain a high level of growth in sales, the market is experiencing a
significant increase in the number of new concepts emerging. Since the
Company's target market is the smaller chains (from 100 to 500 units), this
increase in new concepts should provide the Company with an increase in
prospective lease deals. In addition, as large metropolitan areas in some
geographic areas begin to reach saturation points from the standpoint of
restaurant locations, the Company is seeing more prospective lease deals in
more rural locations, which would tend to be the smaller type franchisee that
the Company targets.
Inflation has not had a material effect on the Company's operations.
Credit Risk:
The Company's net investment balance at June 30, 1998 in assets which are not
performing in accordance with their contractual terms is approximately $2.4
million. Management of the Company has reviewed its collateral position on
these credits 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, including interest and legal and
professional fees. 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 of 1995. Forward-looking statements are
made based upon management's current expectations and beliefs concerning future
developments and their potential effects upon the Company. There can be no
assurance that future developments affecting the Company will be those
anticipated by management. 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;
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. Readers are also directed to other risks and uncertainties
discussed in other documents filed by the Company with the Securities and
Exchange Commission. The Company undertakes no obligation to update or revise
any forward-looking information, whether as a result of new information, future
developments or otherwise.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed by the Registrant
during the quarter
ended June 30, 1998.
12
<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 18, 1998
13
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description Page No. In this Filing
27 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1998
<CASH> 568,820
<SECURITIES> 0
<RECEIVABLES> 17,285,439
<ALLOWANCES> 110,330
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,738,789
<CURRENT-LIABILITIES> 0
<BONDS> 4,888,336
0
3,203,060
<COMMON> (1,548,914)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,738,789
<SALES> 0
<TOTAL-REVENUES> 1,757,241
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 583,970
<LOSS-PROVISION> 52,956
<INTEREST-EXPENSE> 1,202,348
<INCOME-PRETAX> (82,033)
<INCOME-TAX> 0
<INCOME-CONTINUING> (82,033)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,033)
<EPS-PRIMARY> (105.86)
<EPS-DILUTED> (105.86)
</TABLE>
