UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2003
( ) 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: 0-30018
MERIDIAN HOLDINGS,INC.
----------------------
(Exact Name of Registrant as Specified in its Charter)
COLORADO 52-2133742
------------------------------- ------------------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
900 WILSHIRE BOULEVARD, SUITE 500, LOS ANGELES, CALIFORNIA 90017
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(Address of Principal Executive Offices)
(213) 627-8878
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and formal fiscal year, if changed since last
report)
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 and, (2) has been subject to such filing
requirements for the past 90 days. Yes ( X ) No ( )
As of June 30, 2003, Meridian Holdings, Inc., Registrant had 9,370,649
shares of its $0.001 par value common stock outstanding.
Page 1 of 14 sequentially numbered pages
Form 10-Q
Second Quarter 2003
MERIDIAN HOLDINGS, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 14
Signature 14
2
MERIDIAN HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
ASSETS
As of June 30, December
2003 2002
========== ==========
Current assets
Cash and cash equivalents $ 4,891 $ 23,040
Restricted cash 330,133 400,993
Accounts receivable, net of allowance for
doubtful accounts of $179,812 and $179,812 1,263,444 1,155,971
Other current assets 81,425 8,302
------------ --------------
Total current assets 1,679,893 1,588,306
Fixed assets, net of accumulated depreciation 40,926 45,693
Intellectual property, net of accumulated
$0, depreciation as at June 30, 2002 (Note2) - 315,002
Investments 3,448,565 3,911,211
----------- -----------
Total assets $ 5,169,384 $ 5,860,212
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 252,310 $ 282,726
Accrued payroll and other 86,809 391,697
Reserve for incurred but not reported claims 216,553 265,958
Accrued interest - -
Line of credit 80,908 43,885
Current portion of long-term debt - 96,375
------------ ----------
Total current liabilities 636,580 1,080,641
Long Term liabilities
Loan from majority stockholder/officer - -
Long-term debt, net of current portion 41,737 335,530
--------- -----------
Total liabilities 678,317 1,416,171
========= ==========
Commitments and contingencies
Stockholders' equity
Preferred stock (20,000,000 shares authorized,
par value $0.001; no shares issued and outstanding) - -
Common stock (100,000,000 shares authorized, par value
$0.001; 9,345,649 shares issued and outstanding at
June 30, 2001 and 9,370,648 as at June 30, 2002 9,370 9,370
Additional paid-in capital 5,031,475 5,031,760
Accumulated deficit (549,778) (597,089)
------------- -------------
Total stockholders' equity 4,491,067 4,444,041
----------- -----------
Total liabilities and stockholders' equity $ 5,169,384 $ 5,860,212
============ ============
See accompanying notes to Condensed consolidated financial statements
3
MERIDIAN HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
===== ==== ==== ====
Revenues
Capitation $ 458,342 $ 421,847 955,033 831,313
Risk Pool (1,433) 107,854 387,359 300,772
Fee For Service 624 7,749 1,102 16,197
Sale of software - - -
--------- ----------- ---------- ----------
457,533 537,450 1,343,494 1,148,282
Cost of revenues
Capitation (202,533) (136,685) (497,140) (284,729)
--------- ------- ------- ---------
Gross margin 255,000 400,765 846,354 863,553
--------- ------- ------- -----------
Operating expenses
General and administrative 159,118 445,257 734,116 855,695
Research and development - - - -
------- ------- ---------- -------
Income/(loss) from
Operations 95,882 (44,492) 112,238 7,858
-------- ------- ---------- -------
Other income and expense
Equity interest in earnings
(loss) of investment - 116,412 - 111,656
Other net (26,297) (13,928) (64,926) (23,326)
-------- --------- ---------- --------
(26,297) 102,484 (64,926) 88,330
-------- --------- ---------- --------
Net income/(loss) 69,585 57,992 47,311 96,188
=========== =========== =========== ==========
Basic and diluted $ 0.01 $ 0.01 $ 0.01 $ 0.01
Weighted average
shares outstanding 9,383,149 9,383,149 9,383,149 9,383,149
See accompanying notes to Condensed consolidated financial statements
4
MERIDIAN HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
Six Months Ended June 30,
2003 2002
===== ======
Cash flows from operating activities
Net income $ 47,311 96,189
Adjustments to reconcile net Lossincome to net
cash used in operating activities:
Loss on abandonment of software -
Gain on forgiveness of debt -
Depreciation and amortization 7,292 5,412
Equity interest in earnings of investments -
(Increase) decrease in:
Restricted cash 70,860 38,445
Accounts receivable (160,506) 348,769
Other current assets 163,715 (354,355)
Accounts payable 98,328 4,267
Accrued payroll and other (836,467) 13,530
Incurred but not reported reserve - 6,137
Accrued interest - 14,877
--------- ---------
Net cash used in operating activities (609,468) 173,270
Cash flow from investing activities
Acquisition of fixed assets (2,524) (4,560)
Investment in InterCare 278,841 (111,411)
Disposition Of fixed assets 315,002 -
---------- ---------
Net cash used in investing activities 591,319 (115,971)
---------- ---------
Cash flow from financing activities
Borrowings from majority stockholder/officer - (11,262)
Borrowings on long-term debt - -
Repayment of debt (2,046)
Borrowings on line of credit
-------- ---------
Net cash (used in) provided by financing activities - (13,308)
--------- ---------
(Decrease) increase in cash and cash equivalents (18,149) 43,991
Cash and cash equivalents, beginning of period 23,040 7,219
---------- ----------
Cash and cash equivalents, end of period $ 4,891 51,210
========== ==========
Supplemental Disclosure of non-cash investing and financing activities
See accompanying notes to Condensed consolidated financial statements
5
MERIDIAN HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
1. General
Basis of Reporting
The interim accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles ("GAAP") for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of normal, recurring
accruals) considered necessary for a fair presentation have been included.
For further information, management suggests that the reader refer to the
audited financial statements for the year ended December 31, 2002 included in
its Annual Report on Form 10-KSB. Operating results for the six-month
period ended June 30, 2003 are not necessarily indicative of the results of
operations that may be expected for the year ending December 31, 2003.
Nature of Operations
Meridian Holdings, Inc. (the "Company") was incorporated under the laws of the
State of Colorado on October 13, 1998. The Company is located in the City of
Los Angeles, California, U.S.A. and contracts with physicians to provide health
care services primarily within the area of Los Angeles County.
The Company is an acquisition-oriented holding company focused on building,
operating, and managing a portfolio of business-to-business companies. It seeks
to acquire majority or controlling interests in companies engaged in e-commerce,
e-communication, and e-business services, which will allow the holding company
to actively participate in management, operations, and finances. The Company's
network of affiliated companies is designed to encourage maximum leverage of
information technology, operational excellence, industry expertise, and
synergistic business opportunities.
The Company also provides medical services management to its' Capnet IPA health
care provider network. We provide the following services:
- disease management -- a method to manage the costs and care of high risk
patients and produce better patient care
- quality management -- a review of overall patient care measured against
best medical practice patterns
- utilization management -- a daily review of statistical data created by
encounters, referrals, hospital, admissions and nursing home information
- claims adjudication and payment
Cash And Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents ( e.g. restricted cash). From time
to time, the Company maintains cash balances with financial institutions in
excess of federally insured limits.
Use of 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fiscal Year
The Company operates on a December 31 year end.
6
Revenue Recognition
The Company prepares its financial statements and federal income taxes on the
accrual basis of accounting. The Company recognizes capitation revenue on a
monthly basis from managed care plans that contract with the Company for the
delivery of health care services. This capitation revenue is at the
contractually agreed-upon per-member, per-month rates.
Costs of Revenues
The Company recognizes costs of revenues paid to physicians on a monthly basis
who contract with the Company for the delivery of health care services. These
costs are at the contractually agreed-upon per-member, per-month rates
or at the California Medi-cal fee for service rates.
Fair Value of Financial Instruments and Concentration of Credit Risk
The carrying amounts of cash, receivables, accounts payables and accrued
liabilities approximate fair value because of the immediate or short-term
maturity of these financial statements.
Equity Method
Investments in certain companies whereby the Company owns 20 percent or more
interest are carried at cost, adjusted for the Company's proportionate share of
their undistributed earnings or losses, because the Company exercises
significant influence over their operating and financial activities. Such
investee entities include InterCare-dx, Inc. ("InterCare") and CGI
Communications Services, Inc. ("CGI").
2. Investments
InterCare
On September 18, 1999, the Company acquired 51% of all the outstanding Common
Stock of InterCare in exchange for services and assumption of certain debts of
InterCare. During fiscal year 2000, additional stock issued by InterCare
combined with a dividend distribution by the Company of InterCare stock
resulted in a net decrease in the Company's ownership percentage to 32% as at
December 31, 2000. A dividend of approximately $160,800 was recorded reflecting
the relative net book value of the Company's investment in InterCare that was
distributed to Meridian Holdings, Inc., shareholders as at that time.
On April 10, 2003, the board of directors of the registrant approved the
transfer of certain assets of the registrant to Meridian Medical Group, P.C, an
affiliated entity, valued at $675,022, in exchange for forgiveness of $714,833
debt owed by the registrant. As a result of the above incident, the registrant
completely divested itself from InterCare DX, Inc.
CGI
On December 10, 1999, the Company agreed to acquire a 20% equity interest in CGI
for common stock. On December 20, 1999, the board of directors authorized the
issuance of 4,000,000 pre-split (adjusted to 12,000,000 post-split) shares of
common stock in consideration for the 20% of the interest in CGI. At the date
of the transaction, the Company's shares opened at a price of $3 per share.
Between September 1, 1999 and the acquisition date, the Company's stock sold
within a range of $.25 to $3.25 per share (an average of $.97 per share).
Because of the limited trading history of the Company, the six-month average was
deemed to be a fair valuation of the transaction, resulting in a total
investment balance of $3,880,000 as of December 31, 2000 and 1999. The
shareholders of CGI were also issued warrants to purchase an additional
1,000,000 pre-split (adjusted to 3,000,000 post-split) shares of common stock at
$2 pre-split share (or approximately $0.67 on a post-split basis) over a
five-year period as a hedge against any fluctuation of the share price of the
common stock in the immediate future. These warrants will expire on December
30, 2004, and none have been exercised as of June, 2003.
7
3. Fixed Assets
Fixed assets consist of the following:
As of
June 30, 2003 December 31,2002
Computer equipment $ 91,666 $ 78,129
Leasehold improvements 6,500 6,500
Office furniture, fixtures and equipment 61,915 72,928
Software 25,803 25,803
Medical equipment 6,654 6,654
-------- -------
192,538 190,014
Less accumulated depreciation (151,612) (144,321)
--------- --------
$ 40,926 $ 45,693
========= ==========
4. Line of Credit
The Company has a $50,000 line of credit with a financial institution. Related
advances bear interest at 11%, and interest is payable monthly. The line of
credit expires March 21, 2004.
5. Long-term Debt
The Company has various loans with financial institutions with interest rates
ranging from 4% to 15% and maturity dates ranging from 2015 to 2024.
6. Risk Pool Agreement
The Company is a party to a Risk Pool Agreement (the "Agreement") with Tenet
HealthSystem Hospitals, Inc. ("Tenet"). Pursuant to the Agreement, 50% of the
monthly capitation revenue is received directly by the Company, and the
remaining 50% is deposited into an escrow account from which Cap-Management
Systems, Inc., a subsidiary of Tenet pays all claims expenses, reinsurance
expenses, make allowance for IBNR reserve, and retains a management fee.
The Company is responsible for 50% of Profit (loss) after all institutional
claims reinsurance and management fees are paid, and Incurred But Not Reported
("IBNR") reserve have been accounted for.
These revenues and expenses have been reflected in the accompanying Consolidated
statements of operations for the quarters ended June 30, 2003 and 2002.
The Company has also reflected the monies in the escrow account as of June 30,
2003 and June 30, 2002 as restricted cash in the accompanying consolidated
balance sheets. Additionally, Cap-Management Systems, Inc., provides the Company
with an estimate as to the incurred but not reported reserve, which has been
recorded as such in the accompanying consolidated balance sheets.
During the last quarter filing, the registrant disclosed that it was informed
that Tenet HealthSystems Hospitals, Inc., has not been able to renew the
hospital agreement with the County of Los Angeles Community Health Plan, due to
a contract dispute. The agreement terminated as of November 30, 2002, and
the parties remain in renewal discussions.
On August 4, 2003, the registrant was informed that the Tenet HealthSystems
Hospitals contract with the County of Los Angeles Community Health Plan, will
be renewed for another successive contract period.
Related party Transaction
On April 10, 2003, the board of directors of the registrant approved the
transfer of certain assets of the registrant to Meridian Medical Group, P.C, an
affiliated entity, valued at $675,022, in exchange for forgiveness of $714,833
debt owed by the registrant.
8
MERIDIAN HOLDINGS, INC.
THE COMPANY
Meridian Holdings, Inc. (the "Company") was incorporated under the laws of the
State of Colorado on October 13, 1998. The Company is located in the City of
Los Angeles, California, U.S.A. and contracts with physicians to provide health
care services primarily within the greater of Los Angeles County.
The Company became fully reporting under Securities & Exchange Commission
guidelines on March 31, 1999. The Company's common stock started trading on
the OTCBB on August 26, 1999. The Company is an acquisition-oriented holding
company focused on building, operating and managing a portfolio of business
-to-business companies. It seeks to acquire majority or controlling interests
in companies engaged in e-commerce, e-communication, and e-business services,
which will allow the holding company to actively participate in management,
operations, and finances. The Company's network of affiliated companies is
designed to encourage maximum leverage of information technology, operational
excellence, industry expertise, and synergistic business opportunity.
The Company also provides medical services management to its' Capnet IPA health
care provider network. We provide the following services:
- disease management -- a method to manage the costs and care of high risk
patients and produce better patient care
- quality management -- a review of overall patient care measured against
best medical practice patterns
- utilization management -- a daily review of statistical data created by
encounters, referrals, hospital, admissions and nursing home information
- claims adjudication and payment
Under our model, the primary care physicians maintain their independence
but are aligned with a professional staff to assist in providing cost effective
medicine. Each primary care physician provides direct patient services as a
primary care doctor including referrals to specialists, hospital admissions and
referrals to diagnostic services. These physicians are compensated on a per
member per month capitation basis.
We believe our expertise allows us to provide a service and manage the risk that
health insurance companies cannot provide on an efficient and economic level.
Health insurance companies are typically structured as marketing entities
to sell their products on a broad scale. Due to mounting pressures from the
industry, managed care organizations have altered their strategy, returning to
the traditional model of selling insurance and transferring the risk to a
provider service network such as us. Under such arrangements, managed care
organizations receive premiums from the Center for Medicare and Medicaid
Services, State Medicaid programs and other commercial groups and pass a
significant percentage of the premium on to a third party such as us, to provide
covered benefits to patients, including sometimes pharmacy and other enhanced
services. After all medical expenses are paid, any surplus or deficit remains
with the provider service network. When managed properly, accepting this risk
can create significant surpluses.
SELECTED FINANCIAL DATA
The Company had net working capital of $1,043,313 as at June 30, 2003
compared to $ 507,665 at December 31, 2002. This represents an increase in
working capital of 106%. This increase in working capital is attributed to
decrease in amounts owed to the majority shareholder who forgave debts owed to
him by the Company, in exchange for transfer of certain assets of the company,
as was approved by the board of directors of the registrant.
The selected financial data set forth above should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:
The following section contains forward-looking statements that involve risks and
uncertainties, including those referring to the period of time the Company's
existing capital resources will meet the Company's future capital needs, the
Company's future operating results, the market acceptance of the services of the
Company, the Company's efforts to develop new products and services, and the
Company's planned investment in the marketing of its current services and
research and development with regard to future endeavors. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including: domestic
and global economic patterns and trends.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY.
We believe that we will be able to fund our capital commitments, operating cash
requirements and satisfy our obligations as they become due from a combination
of cash on hand, expected operating cash flow improvements through HMO premium
increases and improvements in the benefit structure of HMO contracts.
However, there can be no assurances that these sources of funds will be
sufficient to fund our operations and satisfy our obligations as they become
due.
Long-term cash requirements, other than normal operating expenses, are
anticipated for the continued development of the Company's business plans. The
Company will need to raise additional funds from investors in order to complete
these business plans.
If we need additional capital to fund our operations, there can be
no assurance that such additional capital can be obtained or, if obtained, that
it will be on terms acceptable to us. The incurring or assumption of additional
indebtedness could result in the issuance of additional equity and/or debt which
could have a dilutive effect on current shareholders and a significant effect on
our operations.
RESULTS OF OPERATIONS
THE FINANCIAL RESULTS DISCUSSED BELOW RELATE TO THE OPERATION OF MERIDIAN
HOLDINGS FOR THE THREE MONTHS ENDED AND SIX MONTHS ENDED JUNE 30, 2003 AS
COMPARED TO THE THREE MONTHS ENDED AND SIX MONTHS ENDED JUNE 30, 2002.
REVENUE
Medical services revenues increased by 9% from $ 421,847 for the three
months ended June 30, 2002 to $458,342 for the three months ended
June 30, 2003, and by 15% from $ 831,313 for the six months ended June 30,
2002 to $955,033 for the six months ended June 30, 2003.
We provided managed care services for approximately 30,000 and 25,000 member
months (members per month multiplied by the months for which services were
available) during the six months ended June 30, 2003 and 2002, respectively.
This figure is comparative for both the three months and six months ended June
30, 2003 and 2002 respectively.
Revenue generated by our managed care entities under our contracts with
HMOs as a percentage of medical services revenue was approximately 99% and 96%,
respectively, during the six months ended June 30, 2002 and 2001. Revenue
generated by the Los Angeles County Community Health Plan ("CHP") contracts was
99% and 99.9% of medical services revenue for the six months ended June 30, 2003
and 2002, respectively. Revenue generated by LACARE Health Plan ("LACARE")
contract was 1% and less than 1% of medical services revenue for the six
months ended June 30, 2003 and 2002, respectively. For the three month ended
June 30, 2003, revenue from LA CARE Health Plan was 2% of medical services
revenue as opposed to less than 1% for the comparable period, June 2002
10
EXPENSES
Medical claims paid, which includes capitation payments to our contracted
primary care IPA physicians and medical claims paid revenue after giving
account to IBNR reserves, for the three month period ended June 30,2003 were
$ 94,417 or 21% of medical services revenue, compared to $ 136,685 or 25% of
medical services revenue for the three month period ended June 30, 2002. Medical
services expenses, for the six month period ended June 30,2003 were
$351,249 or 26% of medical services revenue, compared to $284,729 or 25% of
medical services revenue for the six month period ended June 30, 2002. The
decrease for the three month ended June 30, 2003 is due to decrease in volume
of claims paid to contracted providers for services rendered. Conversely,
the increase for the six months ended June 30, 2003 is to due the high volumes
of claims paid during the first quarter of 2003.
Medical claims represent the costs of medical services provided by providers
other than our contracted primary care providers, but which are to be paid
by us for individuals covered by our capitated risk contracts with HMOs. Our
claim loss ratio varies from quarter to quarter due to fluctuations in
utilization, the timing of claims paid by the HMOs on our behalf, as well as
increases in medical costs without counterbalancing increases in capitation
revenues.
For the three months ended June 30, 2003 and 2002, payroll and employee benefits
for administrative personnel was $121,227, or 26% of total revenues, compared to
$121,554 or 23% of revenue, respectively. Payroll and employee benefits for
administrative personnel was $238,617 for the six months ended June 30, 2003, or
18% of total revenues, compared to $275,766 or 24% of revenue for the six months
ended June 30, 2002. The decrease in employee payroll expenses for the six
month was due to reduction in the support staff as well as other cost
containment measures implemented by the registrant.
The company had embarked on an aggressive cost containment measures such as
closing of the Israeli operation and laying-off of some personnel in order to
reduce its operating expense.
Management anticipates that general operating expenses will increase, as it
pursues, vigorously, its acquisition of new business opportunities and the
integration of the existing ones.
INCOME/LOSS FROM OPERATIONS
The registrant recorded a net income from operations for the three months ended
June 30, 2003 of $95,882, or 21% of total revenues, compared to a loss of
$44,492, or 8% of total revenues, for the three months ended June 30, 2002.
During the six months ended June 30, 2003, the registrant recorded an income
from operations of $112,238, or 8.3% of total revenues compared to a net income
from operations of $7,858 or 0.7% of total revenues for the six months ended
June 30, 2002. The increase in net income from operations is due to the
decrease in other operating expenses, as a result of a cost reduction measures.
NET INCOME (LOSS)
The net income for the three months ended June 30, 2003 and 2002 was $69,585
and $57,992 respectively. The net income for six months ended June 30, 2003
and 2002 was $47,311 and $96,188 respectively. The increase in net income
for the three month ended June 30, 2003 is due to the reduction in some other
expenses, compared to decrease in net income for the six months ended June 30,
2003 as a result of the decrease in equity investment income.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
This Form 10-QSB contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. When used in this Form 10-Q, the words
"believe," "anticipate," "think," "intend," "plan," "will be," and similar
expressions, identify such forward-looking statements. Such statements regarding
future events and/or the future financial performance of our Company are subject
to certain risks and uncertainties, which could cause actual events or our
actual future results to differ materially from any forward-looking statement.
11
Certain factors that might cause such a difference are set forth in our Form
10-K for the period ended December 31, 2002, including the following: our
success or failure in implementing our current business and operational
strategies; the availability, terms and access to capital and customary trade
credit; general economic and business conditions; competition; changes in our
business strategy; availability, location and terms of new business development;
availability and terms of necessary or desirable financing or refinancing; labor
relations; the outcome of pending or yet-to-be instituted legal proceedings;
and labor and employee benefit costs.
Medical claims payable include estimates of medical claims expenses incurred
by our members but not yet reported to us. These estimates are based on a number
of factors, including our prior claims experience and pre-authorizations
of treatment. Adjustments, if necessary, are made to medical claims expenses in
the period the actual claims costs are ultimately determined. We cannot assure
that actual medical claims costs in future periods will not exceed our
estimates. If these costs exceed our estimates, our profitability in future
periods will be adversely affected.
Pursuant to the Medicaid program, the federal government supplements
funds provided by the various states for medical assistance to the medically
indigent. Payment for such medical and health services is made to providers in
an amount determined in accordance with procedures and standards established by
state law under federal guidelines. Significant changes have been and may
continue to be made in the Medicaid program which could have an adverse effect
on our financial condition, results of operations and cash flows.
During certain fiscal years, the amounts appropriated by state legislatures
for payment of Medicaid claims have not been sufficient to reimburse providers
for services rendered to Medicaid patients. Failure of a state to pay Medicaid
claims on a timely basis may have an adverse effect on our cash flow, results
of operations and financial condition.
PLAN OF OPERATIONS
On April 10, 2003, the board of directors of the registrant approved the
transfer of certain assets of the registrant to Meridian Medical Group, P.C, an
affiliated entity, valued at $675,022, in exchange for forgiveness of $714,833
debt owed by the registrant.
During the last quarter filing, the registrant disclosed that it was informed
that Tenet HealthSystems Hospitals, Inc., has not been able to renew the
hospital agreement with the County of Los Angeles Community Health Plan, due to
a contract dispute. The agreement terminated as of November 30, 2002, and
the parties remain in renewal discussions. If this contract is not renewed,
the registrant will incur a significant loss of revenue since 50% of these fees
are reflected as income in the registrants' financial statements.
On August 4, 2003, the registrant was informed that the Tenet HealthSystems
Hospitals contract with the County of Los Angeles Community Health Plan, will be
renewed for another successive contract period.
The company has negotiated on behalf of Capnet IPA physician network a
capitated risk contract with one of the federally qualified HMO located in Los
Angeles County, operating within Southern California. This contract will be
effective September 1, 2003. The registrant believes that this new contract
will increase it's revenue significantly.
PART II - OTHER INFORMATION
Item 3: LEGAL PROCEEDINGS
On May 6, 2003, the registrant was served with a summons for a lawsuit filed
in the District Court of Jerusalem, Case No A3359/01(BSA 1646/03) titled "Dr.
Danny Basel vs Corsys Group LTD; Meridian Holdings, Inc., and Anthony C.
Dike." The plaintiff is seeking amongst other things: enforcement of
contract, compensation, negligent misrepresentation, cause in breach of
contract and equitable relief.The registrant has been advised that Dr. Basel's
employment was terminated for cause by Corsys Group LTD, due to intentional
interference with contract and other economic relationship; and negligent
13
interference with economic relationship; breach of fiduciary duty and other
complicity in the Sirius/MedMaster matter as disclosed above, as well as an
act of sabotage against the registrant, which resulted in significant loss of
income and future business opportunities. The registrant has filed a responsive
pleading, believes that the allegations against it are without merit, and
intends to defend itself vigorously. The case is now in the discovery phase.
On June 5, 2003, the registrant filed a petition and a supporting declaration
of Moses O. Onyejekwe, Esq., with the Superior Court of the State of California
for the County of Los Angeles, case number BS083660, styled "Meridian Holdings,
Inc.(Petitioner) vs. Dale Church, and DOES 1 through 50, inclusive" requesting
that the Court grant an order permitting the registrant to file a complaint
against the named defendant to alleged Attorney-Client Conspiracy. As of the
date of this Quarterly Report, the registrant has not received a hearing date
from the Court.
On July 8, 2003, the registrant filed a petition for review with the State of
California Supreme Court, case number S117457, styled "Sirius Computerized
Technologies, LTD (Petitioner) vs Superior Court of the State of California
For the County of Los Angeles (Respondent), Meridian Holdings, Inc.
(Real Party in Interest), " after a decision by the Court of Appeal, Appellate
District, Division Seven Case No. B166285, which overturned the earlier
decision of the Superior Court of California with respect to the issue of
jurisdiction, as disclosed in the last quarter filing with SEC. The registrant
is requesting that the California Supreme Court grant the registrant's
request for review on the basis that there is a need for the law to impose
harsh punishments on parties who are guilty of fraud in connection with their
contractual dealings and yet expect to benefit from their choice of forum. The
case is still pending.
From time to time, we may be engaged in litigation in the ordinary course of
our business or in respect of which we are insured or the cumulative effect of
which litigation our management does not believe may reasonably be expected to
be materially adverse. With respect to existing claims or litigation, our
management does not believe that they will have a material adverse effect on
our consolidated financial condition, results of operations, or future
cash flows.
Item 6. Exhibits and Reports on Form 8-K
31.1 Certification pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
of Anthony C. Dike
31.2 Certification pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
of Foday Sorsor Conteh
32.1 Certification pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
of Anthony C. Dike and Foday Sorsor Conteh
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: August 13, 2003 By: /s/ Anthony C. Dike
____________________________________Signature
Anthony C. Dike
Chief Executive officer
14
Exhibit Description of Document
Number
31.1 Certification pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
of Anthony C. Dike
31.2 Certification pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
of Foday Sorsor Conteh
32.1 Certification pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
of Anthony C. Dike and Foday Sorsor Conteh
15
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Anthony C. Dike, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Meridian Holdings,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this quarterly report based on such evaluation; and
c) disclosed in this quarterly report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 13, 2003
By:_/s/ Anthony C. Dike
Anthony C. Dike
Chairman and CEO (Principal Executive Officer)
16
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Foday Sorsor Conteh, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Meridian Holdings,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this quarterly report based on such evaluation; and
c) disclosed in this quarterly report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 13, 2003
By:_/s/ Foday Sorsor Conteh
Foday Sorsor Conteh
Vice President Finance (Principal Financial Officer)
17
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Meridian Holdings, Inc. (the
"Company") on Form 10-QSB for the period ending June 30, 2003 as filed
with the Securities and Exchange Commission on the date hereof
(the "Report"), we, Anthony C. Dike, the Chief Executive Officer, and Mr.
Foday Sorsor Conteh, Vice President Finance, of the Company, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906,
or other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Meridian
Holdings, Inc., and will be retained by Meridian Holdings, Inc., and
furnished to the Securities and Exchange Commission or its staff upon request.
DATE: August 13, 2003 By: /s/ Anthony C. Dike
-------------------
Anthony C. Dike
Chairman and CEO
By: /s/ Foday Sorsor Conteh
-------------------
Foday Sorsor Conteh
Vice President Finance
18