ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER STOCKHOLDER MATTERS.
(a) MARKET PRICE. ------------- Meridian's Common Stock is traded over-the-counter on the electronic bulletin board operated by the National Association of Securities Dealers. From inception until December 13, 1999, the shares traded under the symbol MDHG. On December 13, 1999, Meridian changed its trading symbol to MUSD in connection with the change of its name to Meridian USA Holdings, Inc. The following table sets forth the high and low bid prices for the Common Stock since the inception of its quotation on the Bulletin Board during the first quarter of 1999.
The above quotations reflect the inter-dealer prices without retail mark-up, mark-down or commissions and may not represent actual transactions.
(b) HOLDERS. -------- As of March 31, 2000, there were 384 record holders of Meridian's Common Stock. Based on information from brokers and other sources, Meridian estimates that as of March 31, 2000 there were approximately 604 beneficial holders of Meridian's Common Stock.
(c) DIVIDENDS. --------- Meridian paid no cash dividends with respect to its Common Stock during 1999 and has no current intention to pay any cash dividend. Meridian declared and distributed a 10% stock dividend to all shareholders of record of Common Stock on September 30, 1999.
ITEM 2.
ITEM 2. LEGAL PROCEEDINGS.
Meridian is not a party to any lawsuit, litigation, or regulatory proceeding of any kind, filed, pending or threatened.
ITEM 3.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In August 1999, at the Annual Meeting of Shareholders, the shareholders elected the present Board of Directors for a term of one (1) year, approved Meridian's 1999 Incentive Stock Option Plan and approved a 10% stock dividend to shareholders of record on September 30, 1999.
ITEM 5.
ITEM 5. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Meridian has no information to report with respect to Section 16(A) Of the Exchange Act.
ITEM 6.
ITEM 6. REPORTS ON FORM 8-K
None.
PART F/S INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------
MERIDIAN USA HOLDINGS, INC. AND SUBSIDIARY
Independent Auditors' Report
Consolidated Balance Sheet
Consolidated Statement of Operations
Consolidated Statement of Stockholders' Equity (Deficit)
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements -F-11
INDEPENDENT AUDITORS' REPORT
To the Board of Directors Meridian USA Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Meridian USA Holdings, Inc. and subsidiary as of December 31,1999, and the related statements of operations, stockholders' deficit and cash flows for the years ended December 31, 1999 and December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Meridian USA Holdings, Inc. and subsidiary, for the years ended December 31, 1999 and December 31, 1998 and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
/S/ Feldman Sherb Horowitz & Co., P.C. Feldman Sherb Horowitz & Co., P.C. Certified Public Accountants
New York, New York March 30, 2000
See notes to consolidated financial statements
See notes to consolidated financial statements
See notes to consolidated financial statements
See notes to consolidated financial statements
MERIDIAN USA HOLDINGS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1999 AND 1998 --------------------------------------
1. ORGANIZATION: -------------
The Old Fashioned Syrup Company, Inc. ("Old Fashioned"), a Florida corporation, was formed in November 1996 for the purpose of developing sugar-free, fat-free, cholesterol-free chocolate-flavored syrup to market and sell principally to retailers and food service customers located throughout the United States. The Old Fashioned Egg Cream Company and The Original Egg Cream Company, both subsidiaries of Old Fashioned, were incorporated in 1993 in the state of Florida.
During January 1999, Old Fashioned was acquired by Meridian USA Holdings, Inc. ("Meridian" or the"Company"), a Florida corporation, for 3,026,794 shares of Meridian common stock and 3,500 shares of its Series I Convertible Preferred Stock (the "Exchange") for all of the shares of Old Fashioned and its subsidiaries. The Exchange has been accounted for as a reverse acquisition under the purchase method for business combinations. Accordingly, the combination of the two companies is recorded as a recapitalization of Old Fashioned, pursuant to which Old Fashioned is treated as the continuing entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of the Company and its subsidiary. All material intercompany transactions have been eliminated.
B. ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
C. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid temporary cash investments with an original maturity of three months or less when purchased, to be cash equivalents.
D. REVENUE RECOGNITION - Revenues are recognized as products are received by customers.
E. INVENTORIES - Inventories are stated at lower of cost or market on
the first-in, first-out method of inventory valuation.
F. PROPERTY AND EQUIPMENT - Property and equipment is stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets.
G. CONCENTRATION OF RISK - Credit losses, if any, have been provided for in the financial statements and are based on management's expectations. The Company's accounts receivable are subject to potential concentrations of credit risk. The Company does not believe that it is subject to any unusual or significant risks, in the normal course of business.
H. INCOME TAXES - Income taxes are accounted for under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns.
I. NET LOSS PER SHARE - Basic earnings per share has been calculated based upon the weighted average number of common shares outstanding. Stock options have been excluded as common stock equivalents in the diluted earnings per share because they are either antidilutive, or their effect is not material.
J. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts reported in the balance sheet for cash, receivables, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments.
K. LICENSING AGREEMENT - The licensing agreement is amortized on a straight-line basis over ten years.
L. IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. At December 31, 1999, the Company believes that there has been no impairment of its long-lived assets.
3. RELATED PARTY TRANSACTIONS ----------------------------
As of December 31, 1999 the Company has a receivable of $99,000 due from two officers of the Company. Such advances are short-term in nature and does not bear interest.
4. PROPERTY AND EQUIPMENT ------------------------
Property and equipment consisted of the following:
5. LICENSING AGREEMENT --------------------
The Company entered into a ten year license agreement, effective January 20, 1999, and as amended in October 1999, with Cumberland Packing Corp. ("Cumberland"), a New York corporation, for the right to use their "Sweet 'N Low" Trademark in order to market the Company's sugar-free, fat-free, cholesterol-free chocolate flavored syrup product. Licensing agreement as of December 31, 1999 is as follows:
The license agreement bears minimum royalty payments of $30,000 in year ending December 31, 2000 and increases in increments of $10,000 per annum throughout the term of the agreement.
6. STOCKHOLDERS' DEFICIT
On July 31, 1998, the Company entered into a one year consulting agreement with a brokerage firm and, as compensation for services, granted a three year option to purchase 25,944 shares of the Company's common stock at an exercise price of $.25. The Company granted to the brokerage firm one time registration rights and unlimited "piggyback" registration rights to the underlying common stock shares of these three year options.
In April 1999, the Company completed a self underwritten Regulation "D" Rule 504 Offering of 49,150 shares of common stock, at the price of $1.00 per share, and 850,000 Common Stock Purchase Warrants ("Warrants"), at a price of $.001 per warrant. As of December 31, 1999, all of the holders' of the warrants had converted to common stock at a conversion price of $1.00 per share.
During January 1999, in connection with the reverse merger, the Company issued 620,000 shares of common stock of which 300,000 shares was issued to a stockholder who acted as advisor, 300,000 shares were issued to a member of the Board of Directors and the remaining balance of 20,000 shares was issued to former officers of Meridian. The common stock was valued at $.001 per share on the dates of issuance and had been recorded as additional paid-in capital.
On August 18, 1999, the Board of Directors declared a 10% stock dividend to be payable to all stockholders of record as of September 30, 1999 and the 521,500 shares of common stock were valued at $1.00 per share on the date of declaration. The stock dividend was distributed on October 15, 1999.
In September 1999, in connection with the Cumberland agreement, the Company has granted warrants to purchase 385,000 (increase from 350,000 shares as a result of the 10% stock dividend) shares of the Company's common stock at an
exercise price equal to the greater of $2.50 per share or 50% of the average trading price for the Company's shares during the twenty days prior to the exercise of the warrants. The warrants expire on December 31, 2008 and management has estimated the value of the warrants, based on the Black-Scholes option pricing model, in order to record $176,000 of deferred licensing cost. The deferred licensing cost is being amortized on a straight-line basis over ten years from the date the warrants were granted. Amortization expense charged to operations for the year ended December 31, 1999 was approximately $5,900.
7. CONVERTIBLE PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of preferred stock at .001 par value, the terms of which may be determined at the time of issuance by the Board of Directors without further action by the shareholders. As of December 31, 1999, 3,500 shares of convertible preferred stock were issued and outstanding. Each share of Preferred Stock is convertible into 300 shares of Common Stock.
8. STOCK OPTION PLAN
In August 1999 the Company's stockholders approved the adoption of an Incentive Stock Option Plan ("1999 Option Plan") which allows the Board of Directors to grant options to employees and members of the Board of Directors. The 1999 Option Plan provides the Board of Directors the right to grant options to purchase up to a total of 100,000 share of the Company's common stock. As of December 31, 1999 no options have been granted.
9. INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. SFAS 109 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.
The provision (benefit) for income taxes differs from the amounts computed by applying the statutory federal income tax rate to income (loss) before provision for income taxes is as follows:
The Company has a net operating loss carryforward for tax purposes totaling approximately $1,071,000 at December 31, 1999 expiring in the year 2019.
Listed below are the tax effects of the items related to the Company's net tax liability:
10. COMMITMENTS
Operating Leases - ---------------- The Company has an operating lease for office space that expires in 2004. The future minimum lease payments are as follows:
11. SUBSEQUENT EVENT
During the period from January 1, 2000 through March 30, 2000, the Company received an additional $427,500 from the sale of shares of stock in private transactions not involving a public offering and from additional capital contributions.
PART III
ITEM 1. INDEX TO EXHIBITS
(10.1) Employment Agreement between the Company and Mark Streisfeld dated January 2000.
(10.2) Employment Agreement between the Company and Alan Posner dated January 2000.
(10.3) Employment Agreement between the Company and Steve Kreuscher dated March 15, 2000.
ITEM 2. DESCRIPTION OF EXHIBITS.
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, thereto duly authorized on the 30th day of March, 2000.
MERIDIAN USA HOLDINGS, INC.
By: /s/ Mark Streisfeld --------------------- Mark Streisfeld, President and Director
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the 30th day of March, 2000.
Principal Executive Officer:
/s/ Mark Streisfeld - ---------------------- Mark Streisfeld President and Director
Principal Financial Officer and Principal Accounting Officer:
/s/ Alan Posner Secretary, Chief - ------------------ Alan Posner Executive Officer and Director
/s/ Paul M. Galant Director - ---------------------- Paul M. Galant
/s/ Ronald Shapss Director - -------------------- Ronald Shapss
/s/ Joel Flig Director - ---------------- Joel Flig